DB Cautious on Chipotle Mexican (CMG) Citing Traffic Slowdown; Cuts Price Target and Estimates

June 12, 2008 11:36 AM EDT

This morning, Deutsche Bank lowered their price target and estimates on Chipotle Mexican Grill (NYSE: CMG), saying the combination of a weak consumer, tough comparisons and margin headwinds will make it challenging for CMG to continue to beat expectations.

The firm lowered their price target from $105 to $90. They also lowered their sales and EPS expectations modestly below the consensus.

The firm's key concern is a traffic slowdown. They said, "Our primary concern is that traffic could slow more than expected in coming quarters. Signs of this have started to emerge, with 2-yr comps slowing and new store performance weakening. Competitor analysis also shows that even the strongest chains in the restaurant sector are seeing comps decelerate. It will be difficult for CMG to continue to buck the trend, particularly with 1/4 of restaurants in challenged consumer/housing markets such as CA, FL, AZ, NV and MI."

The firm is maintaining their Hold rating on CMG, noting that valuation has already come down significantly.

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