Credit Suisse is predicting a steep decline in Chipotle’s stock price.
The burrito maker’s stock has already tumbled 40% from its all-time high of $US749 to its current price of $US451 as it continues to reel from a string of E-coli outbreaks in 2015.
As reported by Business Insider’s Haley Peterson, customers no longer trust the firm’s “food with integrity” mantra.
Now, a team of equity analysts at Credit Suisse, led by Jason West, is predicting the firm’s E-coli woes will continue to weigh on the stock.
In a note sent out to clients on Friday, the analysts said Chipotle is “entering a key phase of recovery,” but that they’re still bearish on its stock.
“[The] recovery from the 2015 food safety events continues to lag our expectations, though we note that the next few quarters will be critical in setting the tone for the pace of recovery going forward,” the bank said.
According to the the analysts, investors will likely see a dip in Chipotle’s earnings per share because the firm will have to keep spending cash in order to win back customers.
The bank added that the recent E-coli outbreak is impacting Chipotle more than other outbreaks have impacted chains in the past. Here’s Credit Suisse:
“CMG’s sales trough in 2016 proved to be much deeper than other similar situations, even the Jack in the Box E. coli event in the early 90s. CMG’s sales should show a sharp recovery in 1Q17 as it laps the first full qtr. of event-impacted sales. From there, history suggests the recovery should become more muted as compares normalize. This more muted recovery scenario is factored into consensus estimates and reflected in the SSS targets outlined in mgmt’s latest incentive compensation plan.”
Credit Suisse has a price target of $US375 for Chipotle’s stock, down another 17% from its current level.