The last thing Chipotle Mexican Grill, Inc. (NYSE: CMG) investors need is negative food safety headlines, but CMG stock dipped 5 percent on Tuesday after the company announced it is shutting down an Ohio restaurant due to several customers becoming ill.
If the Ohio concerns are isolated, some Wall Street analysts say the dip is a buying opportunity for long-term investors, but a widespread outbreak would put a long-term lag on CMG stock.
[See: 7 of the Best Stocks to Buy for 2018.]
Chipotle said on Monday that it is temporarily closing down its restaurant in Powell, Ohio after at least nine customers reported suffering from symptoms such as nausea and fever. In a statement, Chipotle made clear that the incident is isolated to a single location.
“Our protocols identified a handful of illness reports at one restaurant in Powell,” spokeswoman Laurie Schalow told CNBC. “We acted quickly and closed this single restaurant out of an abundance of caution and we are working with the local health officials to reopen this restaurant as soon as possible.”
According to Business Insider, a local health inspection last week found that the same Powell restaurant was not maintaining lettuce and beans at proper temperatures.
While an isolated incident would likely have a negligible impact on Chipotle’s business, investors are understandably uncomfortable after a series of E. coli and norovirus outbreaks in 2015 sent Chipotle’s sales and share price tumbling. From the end of July 2015, when the first E. coli outbreaks occurred, to the end of July 2017, Chipotle stock dropped 53.2 percent.
Prior to this week’s safety scare, Chipotle has finally seemed to find its groove again in 2018. The stock is up 55.6 percent year-to-date, and investors are optimistic about new CEO Brian Niccol, who had success at his previous position as CEO of Taco Bell.
Assuming the Ohio restaurant is reopened in the near future and the incident is isolated in nature, Jefferies analyst Andy Barish says Chipotle appears to be on the brink of delivering the type of same-store sales and earnings growth that could drive significant upside for long-term investors.
[See: 8 Ways to Satisfy a Craving for Restaurant Stocks.]
“We believe CMG is one of the better positioned companies to benefit from the ongoing shift to digital/off-premise, with the operations now poised to again handle increased volume & throughput,” Barish says.
Barish says Chipotle could exceed 2019 consensus earnings estimates by 20 percent.
Barish upgraded CMG stock from “hold” to “buy” on Tuesday and raised his price target from $400 to $550.
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Chipotle Mexican Grill, Inc. (CMG) Stock Hit By Another Food Safety Scare originally appeared on usnews.com
