Deutsche Bank Critical Of Chipotle's 2017 Targets

Deutsche Bank said in a note on Friday Chipotle Mexican Grill, Inc. CMG's recovery is still a riddle, a "riddle, wrapped up in a burrito, inside a foil." The firm believes a recovery will not be easy, quick or straightforward, even with the easy comparison with 2016, which it termed as challenging.

Execution Long Drawn Out Process

Analyst Brett Levy, though noting that same-store sales rose 600 basis points sequentially between the first quarter and third quarters of 2016 and are up against very easy comparisons over 2017, believes execution on its recovery plan is likely to take additional time and plenty of hard work. The analyst also said some of the bullish investors may be overestimating the near-term impact.

Management Efforts Cannot Guarantee Hitting 2017 Goals

Though Deutsche Bank believes management is moving the company in the right direction through board/executive changes, focus on operations and technology etc., it doesn't feel the efforts will guarantee that the company will reach its goals for 2017.

The firm remains concerned about the company's cautious investor base seeking improving same store sales cadence built on low fundamental bar and the potential for unit-level improvements appearing quicker than expected. However, the firm feels modest upside could drive shares higher if investors become a little valuation agnostic.

Deutsche Bank is of the view Chipotle needs an operationally driven turnaround to work and that management changes, expansion plans and in-store execution remain the biggest variables.

Rating At Sell

Deutsche Bank continues to have a cautious view on the company's recovery. The firm rates the company a Sell, with a $280 price target suggesting roughly 29 percent downside from current levels.

At last check, shares of Chipotle were up 1.35 percent at $397.17.