More Trouble for Chipotle: Shares fall 5%, Analysts downgrading Ratings
Chipotle Mexican Grill has already closed some of its restaurants and says it has no clue on what’s sickening its customers. While the company was trying to figure out sources of first E. coli outbreak, it is hit by second outbreak with different strain.
The Centers for Disease Control and Prevention (CDC) announced Monday that it has started investigating second outbreak linked to the Denver-based chain which has sickened five people. As the outbreak continues, Chipotle’s stock is ailing dramatically. On Tuesday, its shares fell more than 5% to about $495.62, lowest in last 23 months.
In a research note on Tuesday, JPMorgan’s John Ivankoe wrote that people have reasons why they should avoid Chipotle for some more days. The analyst downgraded the restaurant chain to neutral and said that the losses to the company will be 8% to 11% decline in fourth quarter. Ivankoe even said that it will be uncomfortable to suggest people buy Chipotle’s stock.
Ivankoe isn’t the only one who has negative view on Chipotle. Two other analysts have joined Ivankoe and give negative remarks to the chain. Sterne Agee’s Lynne Collier lowered rating on Chipotle in previous month’s research note. The analyst gave neutral rating. John Staszak, an analyst at Argus Research also took rating down to hold.
Shares of Chipotle have fallen about 30% since August. There are reports that if Wall Street analysts continue to give negative remarks, the company’s share price will continue to decline.
NY Post reported that, Some on Wall Street are getting sick and tired of Chipotle Mexican Grill and its food issues. On Tuesday, 24 hours after the Denver-based chain was forced to deal with yet another outbreak of E. coli sickening its customers, shares sank 5.1 percent, to $495.62, a 23-month low.
“Even rational and informed consumers could potentially be given reason to pause when choosing Chipotle,” JPMorgan analyst John Ivankoe wrote in a research note on Tuesday.
According to a report from the WashingtonPost, After an E. coli outbreak that sickened more than 50 people, Chipotle is tweaking its cooking methods. Onions will be dipped in boiling water to kill germs before they’re chopped. Raw chicken will be marinated in re-sealable plastic bags, rather than in bowls. Cilantro will be added to freshly cooked rice so the heat gets rid of microbes in the garnish.
“When you’re given a project like this, you look at the universe of hazards,” sad Mansour Samadpour, CEO of IEH Laboratories, which was hired by Chipotle to tighten its procedures.
In a statement provided to QZ News, US health officials said they were investigating a new wave of E. coli cases linked to Chipotle’s restaurants. The company’s stock fell 3.5%. But today the damage was worse. On Tuesday morning, a JPMorgan analyst downgraded Chipotle’s stock to neutral from overweight, and slashed its price target to $555 from $630, citing the newest health investigation as cause for uneasiness.
“At this point, even rational and informed consumers could potentially be given reason to pause when choosing Chipotle over the plethora of fast casual competition in the marketplace,” JPMorgan’s analyst wrote in a note. And later: “We are no longer comfortable recommending the stock until food issues are 100% contained and estimates have stopped going down.”
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