On Tuesday shares of Chipotle Mexican Grill (CMG - Get Report) fell as much as 7.5% after reports surfaced of a store closure where multiple customers fell ill, and the mishap alone was enough for Wells Fargo to downgrade the restaurant chain's stock on Wednesday.
Wells Fargo analyst Jeff Farmer downgraded Chipotle's stock to "Market Perform" from "Outperform" and lowered his price target to $375 from $470.
Because Tuesday's closure comes roughly a year after a wide-scale E. coli outbreak at Chipotle, Farmer implies that the company will face increased traffic headwinds over the next few weeks.
Chipotle's road to recovery following the fallout over the E. coli outbreak was predicated on continued upticks in same-store-sales, but the most recent illness outbreak suggest the company now has a "diminished" same-store sales recovery outlook, Farmer noted.
As a result, the "diminished" prospects will negatively impact unit volume recovery which adversely affects long-term margin and EBITDA recovery, crucial to the stock's valuation.
Chipotle shares fell 6.7% to $365.92 on Wednesday morning.
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