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Chipotle's Best-Case Scenario Is Recovery by 2018, Wedbush Says

  • Chain's current valuation reflects ‘overly optimistic outlook’
  • Higher costs will weigh on profit even if sales rebound
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Chipotle: The Complete History in About Three Minutes

Chipotle Mexican Grill Inc.’s sales won’t rebound from the chain’s wide-ranging food-safety crisis until 2018 at the earliest, and the company still will suffer from lower profitability even then, Wedbush Securities analyst Nick Setyan said in a research note.

Arguing that Chipotle’s current valuation reflects an “overly optimistic outlook” for its recovery, Setyan lowered his price target for the shares to $400 from $450 and cut his rating on the company to the equivalent of a sell from neutral. Chipotle averaged sales of more than $2.5 million per restaurant before the crisis, and returning to that level by 2018 is “the best-case scenario, not the base-case scenario,” Setyan said. Chipotle’s shares fell as much as 4 percent to $456.51 in New York.