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Chipotle's stock has lost more than 17 percent since the start of 2016, 45 percent over the past year and is within striking distance of its 52-week low of $384.77. However, this doesn't mean it is time to buy Chipotle's stock, at least according to analysts at Canaccord Genuity who initiated coverage of the stock with a Hold rating and $424 price target.
According to the analysts, there is simply "too much risk" at current levels, and a Hold recommendation is justified based on: 1) an uncertain recovery in sales following the food safety scandal which produced a food borne illness; 2) Chipotle's margins will trend "significantly below" peak levels due to the food safety scandal, lower sales and inflated labor costs; and 3) Newer built units are now likely to contribute a lower return as the overall brand name has been negatively impacted.
Bottom line, the analysts argued that the impact Chipotle has seen following food safety scandals has been "more severe and prolonged than we anticipated" and puts into question if the company will ever recover to its pre-incident AUV (average unit volume) of around $2.5 million.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.