Market Overview

Chipotle's Headline Risk Is Back And Legal Risks Remain, Maxim Warns

Chipotle's Headline Risk Is Back And Legal Risks Remain, Maxim Warns

Chipotle Mexican Grill, Inc. (NYSE: CMG) has had quite a year of it as the embattled company struggles to regain customer and investor confidence following a series of wide-spread, national foodborne illnesses.

While E. coli scares appeared to fade for a few weeks, a recent forced closure in the Boston-area credited to four sick employees has once more startled wary investors.

Maxim Group Remains Guarded

According to a recent note by Maxim Group, Chipotle is not out of the bad-news fueled woods just yet.

"We still believe it will be a few quarters before the comp trend returns to break-even," the analysts began. "However, in light of this week's news of a norovirus outbreak near Boston, we caution that double-digit negative comps may continue into 2Q16E (June)."

Related Link: Chipotle Haters Are Coming Back

The firm also highlighted the potential federal criminal probe into Chipotle, stating that combining the potential legal risks with the continued norovirus concerns reaffirms the analysts' sentiment "that near-term earnings visibility remains limited."

Maxim elaborated, "Although we argue that management's more aggressive food safety stance – which we contend is highlighted by the hiring of one of the leading food safety laboratories in the U.S. – may mitigate any unfavorable verdict, we still caution that such a verdict may lead to another bout of negative headline risk, thus limiting any further upside in the share price."

Based upon these risks, Maxim is maintaining its Hold rating and $450 price target on the stock.

"As we still believe that: (1) results for the next several quarters are likely to be choppy; (2) new unit growth is not likely to accelerate as rapidly as management forecasts; and (3) legal risk from the expanded federal grand jury investigation may produce prolonged downside, we are maintaining a forward P/E multiple that is below the 31x average of the past three years."

Latest Ratings for CMG

Nov 2020BarclaysInitiates Coverage OnOverweight
Oct 2020Deutsche BankMaintainsHold
Oct 2020Wells FargoMaintainsOverweight

View More Analyst Ratings for CMG
View the Latest Analyst Ratings


Related Articles (CMG)

View Comments and Join the Discussion!

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

Latest Ratings

CAMTStifelInitiates Coverage On19.0
ELMDNorthland Capital MarketsInitiates Coverage On15.0
DKNGUBSInitiates Coverage On52.0
DIODTruist SecuritiesInitiates Coverage On84.0
TGTArgus ResearchUpgrades205.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at