Chipotle Stock May Only Be Worth $620, Wedbush Warns

In a report published Friday, Wedbush analyst Nick Setyan maintained a Neutral rating on

, while reducing the price target from $665 to $620, citing the diminished near-term and medium-term visibility into the company's same-store sales (SSS) trajectory as a risk. "April comps were high-single digits, with pricing contributing 6.1%. As price fell off, our checks indicate comps may be tracking ~6% for the first two months in Q2, implying a low single-digit transaction growth trajectory exiting May," analyst Nick Setyan said. Assuming that a similar run-rate continues through June, SSS growth may fall below the current Q2 consensus of 6.1 percent. Although Chipotle had guided to low-to-mid single-digit SSS growth in Q2, historically SSS growth guidance has proven "meaningfully conservative." Moreover, incremental throughput in the back half of the year may be insufficient for the company to achieve mid-single-digit SSS growth. In the report Wedbush noted, "Historically, a sub 2% menu price increase has required >6% transaction growth for leverage at the unit level, ex COGS. Should drivers of tx growth above mid-single-digits in 2H:15 and 2016 fail to materialize, we believe downside to current EPS expectations exists." Setyan added the lower visibility into near- and medium-term comp trajectory "offsets consistently industry leading unit economics."