Tags: Barrons | Chipotle | Stock | Share Price

Barron's: Chipotle Stock Could Fall as Much as 35 Percent Over Next Year

Barron's: Chipotle Stock Could Fall as Much as 35 Percent Over Next Year

 (AP/Mark Lennihan)

Monday, 06 February 2017 07:56 AM

Chipotle Mexican Grill Inc. could fall as much as 35 percent in the next year, Barron's reported.

The burrito chain is moving beyond a sales decline caused by widespread 2015 outbreaks of tainted-food scandals but its stock is now overvalued, Barron's said. 

The stock is down 47% in the last 18 months. Chipotle shares have increased 8 percent in the past three months to $404 amid an activist led board shuffling, but still trade at 49 times the consensus earnings estimate for 2017, Barron's said.

In this week’s issue, Barron’s magazine ponders whether the worst is over. Is the stock finally worth buying? The answer, it seems, is no.

“We see no reason to doubt that food safety at Chipotle is improving and that fans can eat there with confidence. We have reservations, however, about the safety of earnings forecasts and the share price,” writes Barron’s Jack Hough in this week’s cover story.

One issue is that Chipotle is spending more on food-safety issues to prevent any kind of recurrence. But, it’s simultaneously spending more to bring back lost customers. The spending wave could weigh on profits. 

"A healthy return for investors from here would require either that Chipotle blast past growth estimates in coming years or that shareholders maintain their enthusiasm as growth slows," the paper said.

Barron's, however, did include in its article a bull case for the company from RBC Capital, which has a target price of $465. Another analyst even said the stock could reach $560 under certain circumstances.

"There are 27 analysts who are offering 12-month price targets for Chipotle shares, with a median of $400 a share and a high of $564," Chris Arnold, a spokesman for Chipotle said in an email.


"We don't speculate about what the stock might do, nor do we comment on daily stock price fluctuations. We have made significant progress in our recovery and are optimistic in the strategy we have set out for 2017," Arnold said.

© 2021 Thomson/Reuters. All rights reserved.

Shares of Chipotle have tumbled from $750 to $400 in the last 18 months. Why the stock may still not be a buy.
Barrons, Chipotle, Stock, Share Price
Monday, 06 February 2017 07:56 AM
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