Morgan Stanley Surveys Chipotle Customers, 15% Plan To Never Return

• Morgan Stanley analysts John Glass, Courtney Yakavonis and Christopher E Carril reiterated an Overweight rating and $530.00 price target on shares of Chipotle Mexican Grill, Inc. CMG.
• They pointed out that the near-term impact of the E. Coli scare on sales will is still likely to be "dramatic."

Morgan Stanley conducted a survey of roughly 2,000 U.S. adult consumers over the first week of 2016. Results suggested that, while the health concerns surrounding Chipotle had a negative near-term impact on the brand's image (more than 70 percent of the people were aware of the issues), key brand metrics like food quality, taste and value remain at the same levels as they were in early 2015 and in some cases even higher. This bodes well for a long-term recovery, the report stated.

However, it is interesting to notice that approximately 15 percent of the people surveyed said they would not return to eat at Chipotle "for a long time, if ever."

Partly based on the survey, the experts anticipate a "gradual recovery, forecasting a -20% in the 1Q16, and a 10%+ decline in the 2Q before a gradual 2H recovery."

However, with what the analysts hope is "the worst of the news out now and for those with a tolerance for near term volatility and pressure," they see a favorable risk/reward profile when measuring against 2017 EPS estimates of $17.72.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.