Chipotle Must Balance Headwinds With Innovation, Marketing Initiatives, But Some Analysts Remain Believers

A mixed second-quarter earnings report and an outbreak of norovirus has clouded the crystal balls of analysts who cover Chipotle Mexican Grill, Inc. CMG.

Conservative Approach

Baird Analyst David Tarantino maintained a Neutral rating and lowered the price target to $385 from $425.

“We remain confident in the longer-term fundamental outlook for CMG, but with visibility to the near-term outlook being clouded by the recent sales trajectory, we are taking a more conservative approach with our 2017-2018 estimates,” he wrote.

More Bullish Take

Maxim Group’s Stephen Anderson was more bullish, maintaining a Buy rating and lowering the price target to $435 from $470.

“Despite recent sales volatility, we argue the recent pullback in CMG shares provides an opportunity for investors to participate in CMG’s recovery."

See Also: First Taste Of Chipotle's Q2 Results, Guidance

Issues Remain

UBS analyst Dennis Geiger also maintained a Neutral rating and set a price target of $380, down from $445.

“Despite disappointing +8.1 percent 2Q (Consensus +9.5%), margin management drove an EPS beat ($2.32 vs Cons $2.15). But the focus was on 3QTD challenges, including a deceleration from 2Q's underlying 2-year trend (even before the latest health issue was reported.”

Chipotle was down about 2 percent at $341.60 at time of publication.

Queasy Outlook

Chipotle on Tuesday said it more than doubled its second-quarter earnings from a year ago, aided by lower costs and an improved profit margin. The company missed same-store sales estimates.

Shares fell nearly 12 percent last week after the norovirus outbreak at an eatery in Sterling, Virginia. The company also had an E. coli contamination crisis in 14 states in 2015.

Image credit: Chis Potter, Flickr