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Chipotle (CMG) Tanks on New Food Contamination Scare

Shares of Chipotle CMG plummeted 6.82% through early afternoon trading on Tuesday amid news that a Washington, D.C. area location closed this morning after some customers reported norovirus-like symptoms.

Business Insider first reported that the fast-casual Mexican grill closed a Sterling, Virginia location after customers reported symptoms such as vomiting, diarrhea, dehydration, and nausea. The roughly dozen affected Chipotle customers posted their symptoms on after eating at the restaurant on Friday or Saturday.

Chipotle officials said they were already aware of the small number of illnesses. The company said it is currently working with health authorities to resolve the situation and even plans to reopen the location today after “thorough sanitization.”

"We are working with health authorities to understand what the cause may be and to resolve the situation as quickly as possible," Chipotle executive director of food safety Jim Marsden said in a statement.

"The reported symptoms are consistent with norovirus. Norovirus does not come from our food supply, and it is safe to eat at Chipotle."

The customers who reportedly contracted the norovirus can now count themselves among roughly 20 million Americans who are sickened by this illness every year. According to the Centers for Disease Control and Prevention, norovirus is the leading cause of food-related illness in U.S. – most often caused by contaminated employees who touched food without taking the proper safety precautions.

Can’t Catch A Break

The Denver-based company has fought for the last two years to regain its pre-E.coli outbreak power. Chipotle’s same store sales bounced back a bit in its first quarter after the company spent millions of dollars in marketing and customer giveaways. Last week, the company announced it would begin to test queso dip, new margaritas, and news salads.

Just this morning, Maxim Group analyst Stephen Anderson upgraded Chipotle’s stock to a “Buy” from a “Hold,” and raised its price target price from $440 to $470. The upgrade helped shares of Chipotle gain about 1.1% early Tuesday morning.

What might come as good news for Chipotle investors is that Anderson didn’t back down from his upgrade after today’s norovirus scare.

“We acknowledge [Chipotle] shares are going to be more sensitive than those of peers to health-related restaurant closures, but the norovirus outbreak does not appear to be serious (14 afflicted), nor is there any evidence that the illness has spread beyond that one location,” he said.

However, Chipotle was already a Zacks Rank #4 (Sell) before today’s new setback, which could cause another massive customer retreat. The company also scored an “F” for Value in our Style Score system.

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Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report
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