Here's Why Chipotle Is Overrated And Yum! Brands Deserves More Respect
Chipotle's transaction growth rate will slow to 7.7 percent from 11.3 percent last year, and high food costs as well as expense imposed by the Affordable Care act may hurt margins, according to Tigress' Ivan Feinseth.
Feinseth called Chipotle's valuation "stratospheric" and advised investors to wait for a price drop before buying the shares.
Chipotle shares fell sharply following the company's February earnings report, but are nonetheless "fully valued" according to Feinseth, who reiterated a Neutral rating.
Yum got hammered starting last July by a meat-handling scandal by one of its suppliers in China, where the company gets about half its revenue. In February, Yum said its recovery in China was taking longer than expected.
But Feinseth said consumer perceptions in China will "grind higher" and the region will become a growth driver for Yum.
Feinseth reiterated a Buy rating on Yum and called it "highly under valued."
Analysts on average rate Yum at Hold with a target price of $80.60. Chipotle on average gets a rating of Overweight with a target of $737.83, according to FactSet.
Yum changed hands recently at $79.55, up $0.34; Chipotle traded at $688.95, up $2.30.
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