A Review Of Chipotle's Recovery Finds Challenges Remain

Chipotle Mexican Grill, Inc. (NYSE: CMG) has still failed to recover from its sharp sell-off in mid-July, despite posting strong second-quarter earnings July 25.

Among the company's other recent woes since its norovirus outbreak are a new shareholder lawsuit and an investigation launched by the FDA.

Wall Street, meanwhile, has been mixed, with some analysts upgrading the stock with the idea in mind that the drop is an opportunity for investors.

UBS analyst Dennis Geiger maintains his Neutral rating on the stock, but lowered his price target from $445 to $380.

On Tuesday, the analyst reiterated his rating and price target, citing new customer review score data.

‘Data Highlights A Still Challenged Recovery’

UBS analyzed 130,000 Chipotle customer reviews to get a better sense of consumer sentiment, and recent trends did not paint a great picture.

While score improved through the first quarter, consumers have scored Chipotle about 5 percent worse since March.

This is despite the company’s aggressive marketing, operational improvement efforts and new product launches.

“We're concerned about the return to deteriorating review trends & potential implications for the trajectory of recovery,” said Geiger in a note.

Chipotle’s scores have also been declining faster than its peers. Chipotle’s average score was down 1.1 points on a five point scale since 2010. Qdoba, owned by Jack in the Box Inc. (NASDAQ: JACK), and Moe’s Southwest Grill were down only 0.44 and 0.59 points respectively over the same period.

“We expect continued challenges are likely amidst a difficult industry backdrop, heightened competition and impact from recent health incidents,” said Geiger.

See our full, detailed coverage on Chipotle since the norovirus outbreak and beyond with Benzinga Pro.

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Image Credit: By Guilhem Vellut from Paris, France [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons