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Chipotle: BMO Downgraded the Stock to ‘Underperform’

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On May 23, BMO Capital Markets downgraded Chipotle Mexican Grill (CMG) from “market perform” to “underperform.” There are concerns about rising commodity prices due to African Swine Fever. BMO also lowered its 12-month target price from $675 to $620, which represents a potential fall of 12.2% from Chipotle’s stock price of $706.04.

In his research note, BMO analyst Andrew Strelzik wrote, “It has the greatest pork exposure in our coverage (estimated at 10%), and our work suggests that CMG realizes commodity inflation with little to no lag. This suggests that CMG could be among the earliest to realize the impacts of African Swine Fever, potentially as early as 3Q19,” as reported by CNBC.

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Other analysts’ recommendations

Since Chipotle reported its first-quarter earnings, Piper Jaffray, BTIG, Cowen and Company, Wedbush, J.P. Morgan, and UBS have all hiked their target prices. Among the 31 analysts following Chipotle, 32.3% recommended a “buy,” 48.4% recommended a “hold,” and 6.5% recommended a “sell.” On average, analysts have given Chipotle a 12-month target price of $681.67, which represents a potential fall of 3.5% from its stock price of $706.04.

Peer comparisons

Among the 30 analysts covering McDonald’s (MCD), 76.7% recommended a “buy,” while 23.3% recommended a “hold.” None of the analysts recommended a “sell.” Analysts’ 12-month target price for McDonald’s is $215.0, which implies an upside potential of 7.5% from its stock price of $199.96.

Among the 11 analysts following Shake Shack (SHAK), 27.3% recommended a “buy,” 63.6% recommended a “hold,” and 9.1% recommended a “sell.” Analysts’ 12-month target price for Shake Shack is $60.63, which implies a potential upside of 2.8% from its stock price of $58.96.

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