Yahoo Finance’s call of the week is a bullish one on Chipotle (CMG) following news that the chain had temporarily closed one of its locations in Sterling, Virginia after some of its customers fell sick.
On the same day two Wall Street analysts downgraded the Mexican restaurant chain, analysts at Telsey Advisory group said now’s the time to buy. Analyst Bob Derrington upgraded the stock to outperform from market perform while reiterating his $440 a share price target.
Since Derrington’s upgrade on Wednesday, Chipotle’s week went from bad to worse. The number of customers saying they had fallen ill after eating at the chain’s location in Virginia has reportedly jumped to more than 130, renewing people’s fears about eating at the company’s restaurants. Remember, this isn’t the first time Chipotle’s dealt with a health crisis. In fact, the chain is still struggling to recover from the E.coli and norovirus outbreaks that hit its restaurants in 2015.
But the latest spate of illness reports isn’t affecting Derrington’s outlook on the stock — at least not yet. While he did tell Yahoo Finance that the recent outbreak adds “risk to future earnings expectations,” he was also quick to point out that investing in Chipotle is “not for the faint of heart.”
If Derrington is right, and Chipotle’s stock does bounce back, investors will be kicking themselves for not taking his advice and buying this week’s dip in share price. The stock recorded a weekly loss of 12.8%, hitting its lowest level in more than four years.
Wall Street will get a better glimpse inside Chipotle’s business when the company reports second-quarter earnings on Tuesday after the closing bell. Analysts are expecting earnings of $2.19 a share on revenue of $1.19 billion.
