Chipotle Shares Plunge Following Norovirus Report
Analysts have become split over whether investors should avoid or buy Chipotle after shares of the burrito maker plunged following news that customers became sick after eating in one of its restaurants.
The burrito-chain’s stock has struggled to recover from outbreaks of food-borne illnesses during 2015. In premarket trading early Wednesday, share prices for the stock were down by 1.2%.
Shares of Chipotle fell by 7.6% on Tuesday prior to closing 4.3% down after eight reports of illness were made between July 14 and July 17 in a Sterling, Virginia Chipotle.
Shares of Chipotle dropped 10% in the last 12 months through the end of business on Tuesday versus a return of 14% in the S&P 500. The stock is down 1% during 2017 compared to the market being 10% higher as worries of food safety are continuing to plague the business.
While the norovirus at one location is not that significant overall, there is much more uncertainty now as a reasonable probability exists that the media coverage will be stronger than the severity of the sickness incident and will create new weakness in same-store sales, expanding the downside risk, said one Wall Street strategist.
Chipotle suffered from safety issues involving E. coli during 2015, which led to sales taking a steep drop.
Chipotle did not respond to requests when messages were left for comments, by the media.
On Tuesday, Jim Marsden its director of food safety said that the burrito maker chain notified local officials in the health department of the reports of sickness from people who had eaten at its restaurant in Sterling.
He added that Norovirus does not come from Chipotle’s food supply and it remains safe to eat Chipotle’s food. The company he said was planning to reopen its Sterling restaurant this week and will take every report of people becoming ill seriously.
In following with the company’s established protocols, the team it has in place is working diligently to ensure the safety of all its customers and its employees, including the voluntary closing of its restaurant in Sterling to conduct a full and complete sanitization.
Chipotle will report its earnings for the second quarter on July 25. There is no word yet if that reporting of earnings could be delayed due to this recent outbreak or if it would affect the forecast the company will release for its earnings going forward.
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