Market Overview

Argus Still Concerned With Impact Of Chipotle Outbreaks; Favors Starbucks

Argus Still Concerned With Impact Of Chipotle Outbreaks; Favors Starbucks
Related CMG
Dave & Buster's: It's All Fun And Games With Nearly 30% Upside
Benzinga's Top Upgrades, Downgrades For May 16, 2018
Tracking Al Gore's Generation Investment Management Portfolio - Q1 2018 Update (Seeking Alpha)
Related SBUX
The Market In 5 Minutes: Tesla, Starbucks, Sony, Philip Roth And More
Analyst Doesn't Expect Starbucks Sales To Be Hit By New 'Third Place Policy'
Stocks To Watch: Powerhouse CEOs In The Limelight (Seeking Alpha)

Argus’ John Staszak maintained a Hold rating for Chipotle Mexican Grill, Inc (NYSE: CMG) stating that the company’s image had been tarnished by a spate of food safety issues. He recommended Buy rated Starbucks Corporation (NASDAQ: SBUX) for investors seeking large-cap restaurant stocks.

Although Chipotle had achieved rapid sales growth and benefitted from expansion of its units, its reputation of serving ‘Food with Integrity’ had been damaged. Staszak expects the company’s stock to trade in a narrow range over the next 12 months.

Related Link: Deutsche Bank Downgrades Chipotle, Says Questionable Recovery Is Already Priced In

The company’s Q4 revenues declined 7 percent year-over-year to $998 million and its same store sales were down 14.6 percent, from 16.1 percent growth in the year-ago quarter. The decline in comps sales was largely driven by negative publicity related to food-borne illnesses at a number of Chipotle restaurants. Chipotle reported its EPS at $2.17, down from the year-ago level of $3.84.

Management announced that the Centers for Disease Control had completed an investigation into E-coli outbreaks at the company’s restaurants, while a federal criminal probe relating to food safety incident at a California restaurant had broadened into a national investigation.

Staszak mentioned that Chipotle continues to be strong financially, with no long-term debt and strong cash flows that should suffice to fund the company’s capital spending requirements.

Chipotle’s share price is closely correlated with same store sales growth. “Given prospects for lower comps over the next 3-4 quarters, we see limited near-term upside for CMG and are maintaining our HOLD,” the Argus report stated.

Latest Ratings for CMG

May 2018ArgusUpgradesHoldBuy
Apr 2018Maxim GroupDowngradesBuyHold
Apr 2018BMO CapitalMaintainsMarket PerformMarket Perform

View More Analyst Ratings for CMG
View the Latest Analyst Ratings

Posted-In: ArgusAnalyst Color Long Ideas Reiteration Restaurants Analyst Ratings Trading Ideas General Best of Benzinga


Related Articles (SBUX + CMG)

View Comments and Join the Discussion!