Market Overview

Can Chipotle Make A Comeback?

Can Chipotle Make A Comeback?

The past few months have significantly dulled the shine of fast-food chain Chipotle Mexican Grill, Inc. (NYSE: CMG). E. coli and norovirus outbreaks have tarnished the brand's reputation among consumers and given investors reason to dump the stock for fear that the firm's foodservice days are numbered. Over the past three months, Chipotle's shares have lost 30 percent, leaving many investors to wonder if now is the time to buy into the fast food chain and if a comeback is on the horizon.

Regaining Public Trust

Before the food contamination scares, Chipotle had made its name among consumers as a fast food chain that serves real food "with integrity." However, with worries about food-borne illnesses casting a shadow over the chain, the company's tagline has become somewhat of a joke.

Related Link: This Restaurant ETF Has Endured Chipotle's Slump

Although the company's CEO Steve Ells' promises to implement new food safety rules that will take the risk of contaminated foods to a "level near zero" were intended to do some damage control, some warn that such promises are unattainable and will do little to calm public fears.

Chipotle Can Overcome

Despite that, some analysts say the company's ability to tap into customers' demand for social good and its position as a healthy, natural alternative to the majority of dining options will outweigh the damage done by the E. coli and norovirus outbreaks. The company's business plan is a relatively simple one, and the fact that the chain allows customers to create dishes based on a variety of set ingredients keeps costs down and allows for higher margins.

Using 2016 To Rebuild

So far, the company hasn't made any announcements about cutting back on aggressive store opening plans for 2016, but some believe that the firm could reduce the number of new stores as it regains public trust.

In the coming year, Chipotle is likely to remake its image in an effort to lure in new customers, something that some investors say could be a good thing, as it will set the firm up for growth over the next five years. So, for those who expect to see the effects of contamination fears fade away, now could be a great time to buy.

Image Credit: By [CC BY-SA 2.0], via Wikimedia Commons

Posted-In: E. Coli norovirusLong Ideas News Restaurants Markets Trading Ideas General Best of Benzinga


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