Chipotle’s (CMG) biggest stock-market problem may not be burritos, menu prices or slowing comparable sales.
It might be investor skepticism
Bank of America thinks the restaurant business is demonstrating a demand pattern that might be significant for the beaten-down growth brands, including Chipotle Mexican Grill. Consumers still prefer to cut restaurant wallet share when gas takes up a bigger slice of the household budget, according to the firm’s June 12 restaurant-industry survey. But BofA’s more noteworthy finding is that consumers seem to be holding the line on the amount of restaurant meals they buy, even while price and spending patterns are changing.
That distinction is important to Chipotle since the stock has been caught up in a broader reset for high-growth restaurant names. BofA says the biggest valuation compression has been for companies where comparable sales have slowed, including Chipotle, Domino’s Pizza (DPZ) and Wingstop (WING). The firm still has a Buy rating on Chipotle, with a $50 price target, compared to the price of $31.25 in the report.