Market Overview

With Food Safety Concerns Reemerging, BMO Downgrades Chipotle

Share:
With Food Safety Concerns Reemerging, BMO Downgrades Chipotle

Despite testing queso, the Chipotle Mexican Grill, Inc. (NYSE: CMG) potential norovirus outbreak led BMO Capital Markets analyst Andrew Strelzik to downgrade the stock to Market Perform. Strelzik set a price target of $350.

“While norovirus at a single location is not overly significant on the surface," Strelzik said, "we believe there is greater uncertainty now as there is a reasonable probability that media coverage will outweigh the severity of the incident and create renewed same-store sales weakness, expanding downside risk within our framework."

3 Reasons Behind The Downgrade

  • Food safety concerns are reemerging. It was reported on Tuesday that at least 13 customers were feeling sick after eating at Chipotle's Sterling, Virginia location.
  • While norovirus at one location isn't extremely significant, this outbreak could negatively impact Chipotle customers’ psyche. Strelzik expects them to “likely remained fragile and we believe there is a reasonable probability that media coverage of the new illnesses will outweigh the actual severity of the incident and create renewed samestore sales weakness.”
  • Chipotle might be no longer able to use pricing as a near-term lever due to comps weakness.

Which Stocks Could Benefit?

“Our previous survey work suggested that CMG’s traffic losses accrued to grocery (42% of respondents indicated greater frequency eating at home), other Mexican restaurants (47%), and to a lesser extent to other restaurants (11%),” Strelzik said.

With that being said, he sees Darden Restaurants, Inc. (NYSE: DRI), McDonald's Corporation (NYSE: MCD), and Panera Bread Co (NASDAQ: PNRA) as stocks that could benefit from a traffic decline at Chipotle.

To read the latest and exclusive financial news, check out the Benzinga Pro news wire.

Latest Ratings for CMG

DateFirmActionFromTo
Jan 2020UpgradesSellNeutral
Jan 2020MaintainsEqual-Weight
Jan 2020UpgradesUnderperformPerform

View More Analyst Ratings for CMG
View the Latest Analyst Ratings

Posted-In: Andrew Strelzik BMO Capital MarketsAnalyst Color Downgrades Price Target Restaurants Analyst Ratings General Best of Benzinga

 

Related Articles (CMG + DRI)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
BURLGordon HaskettInitiates Coverage On
PTONRaymond JamesMaintains36.0
XLNXMizuho SecuritiesMaintains98.0
BFSCapital OneDowngrades
OXMNeedhamUpgrades79.0
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.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
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 vipaccounts@benzinga.com