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Chipotle Gets Downgraded by Wedbush Securities

Wedbush is not feeling so optimistic about burrito restaurant chain Chipotle Mexican Grill.

Analyst Nick Setyan with the firm has downgraded the stock from “neutral” to “underperform” and cut his price target on shares from $450 to $445.

The analyst noted that weaker than expected same-store sales growth so far in the third quarter and increased margin pressure through 2020 as reasons for his downgrade.

According to the analyst, Chipotle’s comparable store sales won’t grow as fast during the third quarter as what analysts expect.

Analysts are projecting that Chipotle will see an average of 5.7% growth for same-store sales but Setyan believes the growth will be at 4.5% instead.

The Wedbush analyst has cited the slowdown in same-store sales to an outbreak of Clostridium perfringens in August. The foodborne disease was traded back to a Ohio Chipotle where almost 700 customers had become ill.

According to the Centers for Disease Control and Prevention, Clostridium perfringens is a foodborne disease that occurs when food is kept too warm for too long.

Chipotle had said that it would retrain all of its restaurant employees on food safety and wellness protocols at the time.

Setyan did say however that analysts’ same-store sales estimate of 4.2 percent for full-year 2019, could be possible but there are several “underappreciated” risks including menu price increases from 2017 and early 2018 and new menu items potentially being pushed back further than expected.

Chipotle did recently announce that patrons can now order directly through the company’s mobile app and that delivery is now available in all 70 markets that DoorDash currently serves, or more than 1,800 Chipotle locations in the U.S.

Chipotle has not disclosed what arrangement it has with DoorDash, but it reportedly takes about a 20 percent commission fee from the Chipotle restaurants.

Shares of Chipotle have soared over 70 percent since January.

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