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Chipotle Mexican Grill (CMG) Jumps On CLSA Upgrade

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Shares of Chipotle Mexican Grill Inc. (CMG - Free Report) were trading around 1.5% higher mid-morning Tuesday after analysts at CLSA upgraded the stock from underperform to outperform. The upgrade was thanks to the company’s appearance at the ICR XChange conference, where management said an “all clear” from the CDC on E. Coli is imminent.

The company also said that its new food safety measures will cut restaurant margins by 100-200 basis points, which is not as bad as the market feared, in the analyst’s mind. The analyst also raised her price target from $506 to $536, and increased her earnings estimates for fiscal 2017.

CLSA adds to the list of the many Wall Street analysts who have commented on Chipotle recently. Yesterday Maxim Group reiterated its “sell” rating, and raised its price target from $285 up to $300. Last week Morgan Stanley (MS - Free Report) downgraded the stock to “equal-weight” and lowered its price target to $405 from $500. MS stated that Chipotle’s comeback could take years, as the number of customers it surveyed that said they wouldn’t go back were not encouraging.

Chipotle will report its second quarter results this Thursday, July 21st. The Zacks Consensus EPS Estimate for the company stands at $1.05, and sales are projected to come in at $1.04 billion for the quarter. Chipotle’s EPS estimate from analysts has fallen throughout the quarter, as it stood as $1.55 just 90 days ago.

It’s no secret Chipotle has struggled as of late thanks to the food safety issues the company has had to deal with. CMG is currently a Zacks Rank #4 (Sell) and shares are down nearly 14% year-to-date. The company recently launched its summer rewards program dubbed “Chiptopia”, but results from the promotion won’t be known until after it ends at the end of September.

The company is hoping to return to previous levels of sales and earnings growth, but its yet to be seen exactly when that will be, as earnings and revenues are both projected to come in much lower than their levels last year. CMG’s earnings report later in the week will be one watched by analysts and investors abroad, and will be a solid tell for how the burrito-maker is recovering.

(Also Read: 10 Delicious Facts Behind Chipotle)

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