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CMG

Chipotle

$321.62

-7.68 (-2.33%)

12:36
10/18/17
10/18
12:36
10/18/17
12:36

Chipotle slides after analyst says sell on labor costs concerns

Shares of Chipotle Mexican Grill (CMG) are sliding after Bank of America Merrill Lynch analyst Gregory Francort downgraded the stock to Underperform, a sell-equivalent rating, on labor costs concerns. The analyst argued that while the struggling restaurant chain has done a "very strong job" managing labor in a tough sales backdrop, it will have trouble cutting back labor costs any further than it already has. Meanwhile, his peer at Deutsche Bank told investors that. after evaluating the bull case for shares of Chipotle, he is keeping a Sell rating on the name. SELL CHIPOTLE: In a research note to investors this morning, Bank of America Merrill Lynch's Francort downgraded Chipotle to Underperform from Neutral as he believes, assuming no significant tax reform, 2018 and 2019 consensus earnings per share needs to drop at least 10% on labor costs. While the analyst acknowledges Chipotle has done a "very strong job" managing labor in a tough sales backdrop, he thinks this will limit further margin gains. Francort told investors that further gains from trimming hours will prove difficult which limits the opportunity to get labor below 27% of sales even if traffic recovers. The burrito chain should report "OK" third quarter results later this month, he contended, noting that guidance may disappoint and that he remains concerned 2018 consensus earnings expectations incorporate aggressive labor cost assumptions. The analyst lowered his price target on the shares to $285 from $390. BEAR CASE REMAINS: After evaluating the bull case for shares of Chipotle, Deutsche Bank analyst Brett Levy reiterated a Sell rating on the name. While near-term sales may see a lift, the analyst noted that his cautious view on Chipotle's shares is unchanged as he believes brand, operational, financial and valuation issues may continue to weigh on the stock. However, despite being cautious over the intermediate term, Levy admitted management is working hard to regain its momentum. Additionally, the analyst highlighted that he sees a "wide divide across the investor base" with the top five shareholders owning 33% of the company while 18% of the shares are sold short. PRICE ACTION: In afternoon trading, shares of Chipotle have dropped almost 2.5% to $321.32.

  • 24

    Oct

CMG Chipotle
$321.62

-7.68 (-2.33%)

10/18/17
10/18/17
DOWNGRADE

On The Fly: Top five analyst downgrades
Catch up on today's top five analyst downgrades with this list compiled by The Fly: 1. Chevron (CVX) was downgraded to Hold from Buy at Societe Generale and to Market Perform on valuation at BMO Capital. 2. Ulta Beauty (ULTA) downgraded to Neutral from Overweight at Piper Jaffray with analyst Erinn Murphy saying her firm's Fall teen survey indicated spending declines in color cosmetics among all female teens. 3. Chipotle (CMG) downgraded to Underperform from Neutral at BofA/Merrill with analyst Gregory Francort saying he believes Chipotle has down a "very good job" managing labor costs but expects further gains to be difficult, combined with the tough sales backdrop, will limit further margin expansion. 4. Roche (RHHBY) downgraded to Neutral from Buy at Citi with analyst Andrew Baum saying Roche's rate of progress in the immuno-oncology field have underperformed. 5. Blackhawk (HAWK) downgraded to Neutral from Buy at Mizuho. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
10/18/17
BOFA
10/18/17
DOWNGRADE
Target $285
BOFA
Underperform
Chipotle downgraded to Underperform from Neutral at BofA/Merrill
BofA/Merrill analyst Gregory Francort downgraded Chipotle to Underperform and cut its price target to $285 from $390. The analyst believes Chipotle has down a "very good job" managing labor costs but expects further gains to be difficult, combined with the tough sales backdrop, will limit further margin expansion. Francort expects Q3 results will be "OK," but said guidance could disappoint and is concerned 2018 consensus earnings expectations incorporate aggressive labor cost assumptions.
10/18/17
DBAB
10/18/17
NO CHANGE
Target $250
DBAB
Sell
After looking at bull case, Deutsche keeps Sell rating on Chipotle
After evaluation the bull case for shares of Chipotle Mexican Grill, Deutsche Bank analyst Brett Levy keeps a Sell rating on the shares with a $250 price target. While the company's near-term sales "may see a lift," Chipotle's brand, operational, financial and valuation issues may continue to weigh on the shares, Levy tells investors in a research note titled "With Our Bear Case Established, We Look At The Bulls' Point-Of-View." The analyst sees a "wide divide across the investor base" with the top five shareholders owning 33% of the company while 18% of the shares are sold short.
10/18/17
LEHM
10/18/17
NO CHANGE
Target $325
LEHM
Equal Weight
Chipotle price target lowered to $325 from $370 at Barclays
Barclays analyst Jeffrey Bernstein lowered his price target for Chipotle Mexican Grill (CMG) to $325 saying he's cautious on the cautious into the Q3 earnings results. Fundamentals for restaurants are increasingly challenged and visibility remains limited, Bernstein tells investors in a research previewing the sector's earnings reports. His best ideas are McDonald's (MCD) followed by Wendy's (WEN) in quick service and Darden (DRI) followed by Bloomin' Brands (BLMN) in casual. The analyst adds that he's "intrigued" by Starbucks (SBUX).

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