Oppenheimer Is Bullish On Chipotle's Recovery In Fundamentals, Compares Fear To Taco Bell In 2006

• Shares of Chipotle Mexican Grill, Inc CMG are down 18 percent year-to-date, despite having risen above $700 several times during the year.
• Oppenheimer's analysts believe the near-term sales weakness at the company is transitory.

Chipotle reported a 16 percent decline in November comps. Oppenheimer termed the recent weakness in the company’s sales as “transitory” based on their analysis of Taco Bell’s 2006 E.coli incident.

“We'd take advantage of stock reset with 2H16 themes in mind,” the report stated, while adding that Chiptole’s November comps were consistent with Taco Bell’s immediate plunge after its incident. Three weeks after the latter company’s last reported infection, comps had bottomed out and had begun recovering.

The EPS estimate for FY16 has been reduced by 12 percent to reflect sales de-leverage and uncertainty in 1H16. The Oppenheimer analysts expect Chipotle’s fundamentals to begin recovering from 1Q16 and continue thereafter on easy comps throughout the year.