The shares of Chipotle (CMG) are advancing after JPMorgan upgraded the Mexican restaurant operators' stock, saying that the company's comparable sales are poised to rebound significantly.
WHAT'S NEW: JPMorgan analyst John Ivankoe upgraded Chipotle to Overweight from Neutral, predicting that the company's comparative sales are poised to rebound from their first quarter low. Although the fast food chain's profits will probably fall to fiscal 2014 levels in fiscal 2017, they should increase by over 20% in fiscal 2018 and in subsequent years, according to Ivankoe. The stock does not reflect the coming increase in the company's profits, the analyst contended. Ivankoe noted that his upgrade is based on Chipotle "being a highly meaningful brand, that with time and expense can regain customer trust." He raised his price target on the stock to $510 from $465.
WHAT'S NOTABLE: Earlier this week, CLSA analyst Jeremy Scott assumed coverage of the restaurant sector from Diane Geissler, bringing with him a more bearish take on the space. Among the notable downgrades Scott made was Chipotle, which he cut two steps to Underperform from Buy. Although the firm expects the chain's comps to bottom by the end of the summer, it predicted that its earnings growth would decelerate due to the impact of higher intensity food safety protocols and labor inflation. CLSA's Scott cut his price target on the name to $460 from $613.
PRICE ACTION: In early trading, Chipotle rose 3% to $458.
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