Stock analysts are pulling their hair out trying to discern Chipotle’s stock value after norovirus and E. Coli outbreaks across the country.
Experts painted an ugly short-term picture for the Mexican-food chain during a “Trading Nation” interview on Tuesday. Twenty-five percent of the company’s value has been lost in the last 60 days.
“With all the uncertainty that’s floating around the stock, you know, I think drawing a line in the sand and saying, ‘The bleeding is over’ is an impossible case to make,” said David Seaburg of Cowen & Co. said. “It’s going to take a lot of time for them to really recover from this. It’s almost impossible to accurately gauge same-store sales numbers given this turn of events.”
Ari Wald of Oppenheimer agreed.
“It’s been really a free-fall decline,” said Wald. “Momentum is pointing downward as well.”
Both men said Chipotle, which is valued at $24 billion and has 2,000 locations, is likely to weather the storm. The process will be financially painful as it deals with repercussions of having health scares in 12 states. An E. coli incident Dec. 4 in Boston sickened 136, and the CDC revealed similar incidents in Kansas and Oklahoma last month.
Illnesses from all Chipotle-related outbreaks since July now stand at 514, including five sickened in Seattle in July, 234 in Simi Valley, California, in August, 64 in Minnesota in August and September, 58 scattered among California, Illinois, Kansas, Maryland, Minnesota, New York, Ohio, Oklahoma, North Dakota, Oregon, Pennsylvania and Washington starting in October, and 151 in and around Boston starting in December, WND reported Sunday.
“Near-term people should stay the heck away. It’s a real guessing game. You have no idea where this thing is going to go,” said Seaburg.
Chipotle told investors in a Dec. 4 report to expect a sales drop of 8 percent to 11 percent. Diluted earnings per share is expected to range from $2.45 to $2.85, and $6 million to $8 million will be spent on food safety in the fourth quarter (not including legal expenses).
The legal limbo appears to be what has analysts most confused in terms of gauging Chipotle’s value.
“The estimates are all over the board all over the street,” BTIG’s Peter Saleh told CNBC Tuesday. “And everybody could be totally wrong. We’re trying to estimate off of negative-double-digit comps in November, and it’s really hard to do. We believe Chipotle can recover from this issue and the outbreak will not impact the company’s long-term growth or sales trajectory.”
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Chipotle has been working overtime to try and convince customers that counters and kitchens have been disinfected, new supplies have been ordered, and improved safety measures are being implemented.
“Work on our enhanced food safety program began immediately after reports surfaced at the end of October regarding the E. coli cases in Washington and Oregon,” the company said on its website Dec. 21. “The enhanced food safety program is the product of a comprehensive reassessment of our food safety practices conducted with IEH Laboratories that included a farm-to-fork assessment of each ingredient we use with an eye toward establishing the highest standards for safety.”