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Credit Suisse warns on avocado costs for Chipotle

Published 08/25/2017, 01:04 PM
© Reuters.  Credit Suisse warns on avocado costs for Chipotle
CSGN
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CMG
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  • Credit Suisse (SIX:CSGN) lowers its price target on Chipotle (CMG +2.3%) to $320, partially due to concerns that higher avocado prices will clip the restaurant operator's margins in Q3 and Q4.
  • "Avocado prices have risen by ~75% since July and are running ~+50% y/y, driven by supply shortages in Mexico and a weaker than expected California harvest," observes the CS team.
  • "We would not be buyers on recent weakness given limited visibility on the trajectory of SSS (due to July norovirus incident) and avoc. inflation. We lower our 2017/2018 EPS to $6.38/$9.57 (from $6.95/$9.71)."
  • CMG is rated at Neutral by Credit Suisse.
  • Chipotle is higher on the day amid a solid day for restaurant stocks.
  • Now read: Chipotle: Will 0 Hold?


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