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For Chipotle, The Worst Is Over Soon Or Not Depending On Who You Ask

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For Chipotle, The Worst Is Over Soon Or Not Depending On Who You Ask

The negative sentiment surrounding Chipotle Mexican Grill, Inc. (NYSE: CMG) intensified this week after analysts at Bank of America downgraded the stock. But in reality, only 11 percent of Wall Street analysts have a Sell rating on Chipotle's stock with the majority recommending a Hold rating, Gina Sanchez, CEO of Chantico Global, said during a recent CNBC "Trading Nation" segment.

However, part of the negative sentiment surrounding Chipotle is the company's inability to cut back on labor costs, Sanchez said. This should be viewed by investors as a "real issue" and a legitimate "concern" at a time when recent strings of bad publicity from a food safety standpoint remain in place.

On top of that, Chipotle is the "most expensive stock right now" relative to some of its closest peers, including Jack in the Box Inc. (NASDAQ: JACK), she also said.

The Charts Are Supportive

Chipotle's stock has shown the ability to bounce off the $300 level, which is an encouraging sign, Matt Maley, an equity strategist at Miller Tabak said during the same "Trading Nation" segment. On multiple occasions in August, September and early October the stock held the $300 level.

Chipotle's stock was trading at $321 Thursday, which implies a downside scenario of around $20 per share if the stock's pattern continues to hold up. But if the stock could rally and break above its prior highs last week at around $332 it can show that on a technical level "the worst might actually be behind it," he said.

But on the other hand, if Chipotle's stock breaks meaningfully below the $300 mark then investors will have a big problem.

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Image Credit: By Greg [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Latest Ratings for CMG

DateFirmActionFromTo
Jul 2020BTIGMaintainsBuy
Jul 2020BMO CapitalMaintainsMarket Perform
Jul 2020Deutsche BankMaintainsHold

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