E. Coli Scare Could Cut Chipotle Earnings By 5% This Quarter, Estimates Say

• Chipotle Mexican Grill, Inc. CMG has seen a 16.08 percent decline in its share price over the past three months, with a low of $624on November 2.
• Piper Jaffray’s Nicole Miller Regan has reiterated an Overweight rating and price target of $737 on the company.
• Although the recent E.Coli issue is expected to pressure the stock in the near term, Regan believes that the recent pullback in the shares offers an attractive entry point for “patient” investors.

Analyst Nicole Miller Regan mentioned that there had been reports regarding an E.Coli issue in the company’s Pacific North West stores.

According to the Piper Jaffray report, “Operational protocols are being executed in perfect alignment with the Chipotle brand equity.”

Regan believes that the stock could remain pressured till there is more news and information regarding the E.Coli issue, although she expressed optimism regarding Chipotle Mexican Grill’s “operational protocols and quick reaction time.”

Although there has been no information regarding where the bacteria actually originated, Regan mentioned that the company has been conservative in closing stores “above and beyond” those that were likely to have been impacted in an attempt to limit any further impact.

“In the meantime, we believe the company is working to assess, identify, and correct the current situation while also actively managing relations with both guests and Chipotle team members,” Regan stated.

On the other hand, the store closures could adversely impact the 4Q15 earnings by 5 percent, if the closed stores remain closed through the year without any additional closures.

Regan believes that Chipotle Mexican Grill’s robust balance sheet supports share buybacks, which in turn could prove to be a near term catalyst for the stock.