Online Sentiment For Chipotle Is - Surprise - Not Good

Following Chipotle Mexican Grill, Inc. CMG's disastrous week when shares fell over 12 percent, sentiment continues to be negative. Credit Suisse analyst Jason West lowered his price target from $425 to $325 with a Neutral rating.

The million-dollar question analysts have been trying to answer is whether this past week would have a huge impact on Chipotle’s same-stores sales. West sees these instances having a huge effect on Chipotle and anticipates sales falling after looking at sentiment data (see his track record here).

These Outbreaks Should Have A Negative Effect On Same-Store Sales

“Not surprisingly, online sentiment plummeted in recent days. Daily net sentiment fell from 55 on July 17, to -11 on July 18. Sentiment "improved" to 12 and 16 on July 19 and July 20, resp., though these are still depressed figures by historical standards," West said.

To put these numbers in comparison, following the E. coli and Boston norovirus incidents in 2015, online sentiment averaged 24, and this was the low point.

In the past, this data has had a 76 percent correlation with Chipotle’s same-store sales, and “this data suggests SSS have likely fallen to at least negative 10% in recent days, if not worse. Previously, we had been modeling +10% SSS for the month of July and +7% for 3Q17,” West noted.

Expect Slower Unit Growth Going Forward

While it is possible that these headlines fade and sales trend improve, however, West believes the effects of multiple food safety events since 2015 having a large effect. Thus, he lowered his Q3 and Q4 same -store sales estimates, expects Chipotle to delay price increases and to slow down store growth.

To read about the latest news financial news and to explore Chipotle’s current analyst ratings, visit the Benzinga Pro news wire.