Chipotle Mexican Grill, Inc. (NYSE:CMG) To Spend Big On Marketing

Chipotle Mexican Grill, Inc. (NYSE:CMG) has not had the best of runs in the recent past, its reputation having come under immense pressure at the back of the E.coli outbreak. It now faces an unprecedented future. Federal prosecutors have lodged investigations into the food safety scare. Amidst the uncertainty and scare, the fast food joint is putting a brave face as it looks to start 2016 on a clean slate.


Heavy Spending On Marketing

The fast food joint plans to spend heavily on marketing all in the effort of rebuilding its dented image in the business. It is currently struggling with a decline in traffic to its stores as customers remain wary of the E.coli outbreak. The Center for Disease Control and Prevention says the outbreaks appear to be over. However, that has not done much in triggering store traffic, into Chipotle Mexican Grill, Inc. (NYSE:CMG)’s outlets.

Spending big on marketing is the only way the fast joint can be able to resurrect its prospects in the highly competitive business. Sales in January plunged by more than a third another indication the company has to do more if it is to attract customers. Sales declining by 15% in the fourth quarter have all but continued to dent the stock’s sentiments on the Street.

Analyst’s Bullish Sentiments

Sean Sun an associate portfolio manager at Thornburg Core Growth Fund believes the stock has tanked to its lowest level. As of December, the firm had 1.4% of its assets invested in the embattled fast food joint. Wells Fargo analyst Jeff Farmer is also remaining bullish about Chipotle’s prospects going forward.

Most restaurants that experience food safety issue always return to sustained same-store sales growth within 12-15 months. It is a fact that Farmer expects to re-occur when it comes to Chipotle stock. The analyst has an outperform rating on the stock from ‘market perform.’

Following a disappointing earnings report in the recent quarter, a good number of brokerage firms have slashed their price target for the stock. Even so, Chipotle Mexican Grill, Inc. (NYSE:CMG) commands a $475 average share price target, which means it could rise by 8% in the coming 12 months

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