Investors React To Chipotle Losing A Lot Of Customers

Despite the fact that Chipotle has lost many customers after an E. coli outbreak last year, investors seem to be encouraged by the burrito chain.

The stock has surged around 5% in the last month despite any major positive news.

“We have always used high quality ingredients and prepared them using classic cooking techniques,” Chipotle Founder and CEO Steve Ells said in a statement Tuesday.

“We never resorted to using added colors or flavors like many other fast food companies.”

Wow Ells, your restaurant isn’t completely out of the woods yet so may not be the best idea to compare yourself to competition just yet.

Wedbush analyst Nick Setyan has said, “There’s probably some five to 10 percentage of customers that will never return.” He has a neutral rating on Chipotle’s stock.

Jefferies analyst Andy Barish wrote in a note in February, “We expect a slower than targeted same-store sales recovery along with higher costs associated with new food safety programs to keep margins below historical levels of 20% plus.” We believe current valuation is not capturing the fundamental operating changes and potential risks.”

Barish rated the stock “underperform” and has given it a $300 price target. His price target would represent a steep 31% decline.

The company missed on its fourth quarter earnings and posted 55 cents a share. This was below the average analyst estimate of 57 cents a share. Chipotle reported $1.03 billion for revenue which was in line with expectations.
The chain said sales at its established restaurants fall 4.8 percent during the fourth quarter.

“In the upcoming year we intend to continue to simplify and improve our restaurant operations, utilize creative marketing to rebuild our brand, and further the roll-out of our digital sales efforts,” Steve Ells, man CEO of Chipotle, said in a statement in February.

“All three of these strategic initiatives are centered on improving the guest experience and restoring customer affinity for the Chipotle brand, and we are confident in our teams’ abilities as we start this new year.”

The company expects same-store sales to rebound and be in the high-single digit range in 2017.

A Chipotle spokesman didn’t immediately return a request for comment.

Disclaimer: We have no position in Chipotle Mexican Grill, Inc. (NYSE: CMG) and have not been compensated for this article.