Chipotle Mexican Grill, Inc. (CMG) Regaining Consumer Confidence, Says William Blair

18 to 29 Year-Olds Least Worried About Food Safety at Chipotle


Chipotle Mexican Grill, Inc. (NYSE:CMG) stock continued its free fall yesterday reaching $297.09, its lowest point since December 2012. Like the E. coli outbreak of 2015, the mega restaurant chain was hit once again with a food safety scare with the norovirus outbreak last month, leading to a closed location in Virginia and suddenly weakened investor confidence.

After testing consumer sentiment waters with a survey to gauge worry with regard to food safety, analyst Sharon Zackfia of William Blair is pleased to see metrics have improved since her most recent poll back in January, particularly in the West. Though the Northeast remains apprehensive, weighing in Chipotle’s favor is positive conviction among 18 to 29 year-olds, who have indicated the least concern related to the chain’s food safety challenges.

Observing “continued improving trends” and with a Queso dip launch soon to generate some much-welcomed hype from CMG’s first-ever national television advertisement marketing approach, Zackfia believes that the company may see a turnaround.

The analyst notes, “Given the mid-July outbreak of norovirus linked to a Chipotle location in Virginia, we surveyed 800 adults to assess the impact, largely replicating the monthly surveys we completed between November 2015 and January 2017 after the E. coli outbreak in October 2015. While awareness and impact to intent was meaningful, it appears far less impactful than the E. coli outbreak, bolstering our optimism that comps could recover any lost momentum in four to five months, similar to what occurred following the March 2016 norovirus incident. (Note that awareness of the E. coli outbreak rose to 85% by February 2016 given ongoing media coverage, which we do not anticipate to be the case with the norovirus incident.) Such a recovery could potentially be accelerated by the launch of queso this fall, which may be augmented by product-specific television marketing (marking the first time Chipotle has featured new product news).”

The analyst maintains an Outperform rating on CMG without providing a price target. (To watch Zackfia’s track record, click here)

TipRanks analytics demonstrate CMG as a Hold. Of 27 analysts polled by TipRanks, 6 are bullish, 3 bearish, while 18 are sidelined on Chipotle stock. The 12-month average price target stands at $408.43 representing a 37% upside from current trading levels.

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