Chipotle Mexican Grill, Inc. (CMG): This Burrito Stock Is Bombing

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Chipotle Mexican Grill, Inc. (CMG) is plumbing the depths.

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Shares of the downtrodden fast-casual chain hit lows not seen in three years on Tuesday, with the only upside being that CMG stock managed to claw its way back just above breakeven for the day. But shares still remain down 18% year-to-date and off nearly 50% from their 2015 highs.

The culprit (besides Chipotle’s own E.coli failings): a bearish report from Deutsche Bank analyst Brett Levy on Monday, which left CMG stock at three-year lows.

Analysts Aren’t Biting on CMG Stock

Levy dampened his already dismal view of Chipotle stock, cutting his price target on CMG from $360 to $340, which leaves about 15% more downside from Tuesday’s level of $394.

Adding insult in injury, Levy added that Chipotle’s customers “may be lost for good.”

Of the 35 analysts covering the stock, six of them advise reducing or selling, and another 18 are sitting on “hold” recommendations. Morningstar analyst RJ Hottovy suspects Chipotle will post a same-store sales decline of 20% in its second quarter. While the average price target still indicates 17% upside, that’s still a generally weak overview by the typically buy-happy Wall Street analyst horde.

Indeed, Chipotle’s image was assailed as it was recently ranked behind fast-food companies, such as McDonald’s Corporation (MCD), for overdoing it with the calories. And, as Hottovy points out, the prevalence of social media is making it hard for customers to forgive and let live with the Chipotle brand. Turns out that the majority of the population would rather eat at Moe’s Southwest Grill nowadays. And let’s not forget about competition from Jack in the Box Inc. (JACK) and Yum! Brands, Inc. (YUM).

Meanwhile, CMG stock is in a technical funk, with shares hurtling lower after failing to break through their 50-day moving average over the past month or so. Chipotle now is plumbing its January lows around the $400 level — and a lot more downside could be in store if CMG can’t hold here.

The upside in the short-term is that CMG is oversold, based on its sub-30 Relative Strength Index, though it took a much stronger oversold reading in January before shares woke up.

As customers increasingly turn away from Chipotle in favor of competitors and the company fights a losing war of sacrificing margins for customer retention, CMG stock remains a bear lost in the woods.

Stay away.

As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/06/chipotle-mexican-grill-inc-cmg-stock-bombing/.

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