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Here's Why Chipotle Is Overrated And Yum! Brands Deserves More Respect

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Here's Why Chipotle Is Overrated And Yum! Brands Deserves More Respect
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Chipotle Mexican Grill, Inc. (NYSE: CMG) shares are overvalued while Yum! Brands, Inc. (NYSE: YUM) will eventually recover from its food-scare fiasco in China, an analyst said Monday.

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.

Related Link: Analyst: Chipotle Is Successful Because It Sticks To What Works

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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Latest Ratings for CMG

DateFirmActionFromTo
Jan 2017JP MorganDowngradesOverweightNeutral
Jan 2017WedbushUpgradesUnderperformNeutral
Nov 2016GuggenheimDowngradesNeutralSell

View More Analyst Ratings for CMG
View the Latest Analyst Ratings

Posted-In: Ivan Feinseth. Tigress FinancialAnalyst Color Reiteration Restaurants Analyst Ratings General Best of Benzinga

 

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