Chipotle shares down after sales warning linked to E. coli

Chipotle sales have drastically plummeted since the E. Coli outbreak returned and spread for the third time.

Shares of Chipotle tumbled as much as 8% in early morning trading Monday on the news before recovering a bit.

Chipotle’s stock fell 7 percent to $513 in after-hours trading, after closing down 1.7 percent Monday. Nevertheless, the analyst stated that at $520 per share, Chipotle’s stock is attractive, as it implies a valuation of 26x current 2016 earnings per share consensus estimates, or 29 percent below its long-term P/E.

On Friday, U.S. Centers for Disease Control and Prevention added Illinois, Maryland and Pennsylvania to the list of states reporting illness.

Chipotle has taken steps to reassure customers and investors.

Chris Arnold, a spokesman for Chipotle Mexican Grill Inc., said the company’s local produce suppliers may not all be able to meet the new standards. And it will cost a lot in the process.

Finally, Bernstein suggested that aside from the “obvious” near-term comp pressure, the company also faces incremental costs to labor to “better insulate the supply chain” and a “lack of pricing power” following the E. Coli backdrop. “The question is how expensive will it be to fix it”, said Howard Penney, a managing director who follows consumer stocks for Hedgeye Risk Management. But the financial damage has already been done. But the connection to the restaurant chain is less certain among the latest cases.

Fifty-nine percent of people who got sick are female.

Shares of Jack in the Box plunged as a result and did not get back to their pre-outrbreak levels until the spring of 1997.

Ninety percent of the people interviewed by the CDC said they’d eaten at a Chipotle restaurant within a week of becoming infected, causing epidemiologists to link the fast-casual Mexican eatery to the outbreak.

Senatore continued that Chipotle’s sales have “gradually” improved over the past few days and the “historical strength” of the company’s brand image offers “confidence” that a sustained recovery trajectory will emerge.

The illnesses were first reported on October 19, 2015 and resulted in the temporary closure of a number of Chipotle Mexican Grill restaurants in the Pacific Northwest.

Saleh did slash his price target on the stock though because of the expected drop in sales and earnings for the next few months. (NYSE:CMG) develops and operates Chipotle Mexican Grill restaurants, which serve a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads.

“Chipotle’s food is expensive”. Vetr upgraded shares of Chipotle Mexican Grill from a “hold” rating to a “buy” rating and set a $710.58 price objective for the company in a research note on Wednesday, October 21st. Have you stopped eating at Chipotle due to E. coli concerns?