Analyst: Chipotle price hike may restrict sales

NEW YORK - Shares of Chipotle Mexican Grill Inc. fell Wednesday after a Wedbush Morgan Securities analyst said a recent hike in menu prices may restrict sales growth at the restaurant chain.

Shares fell $2.29, or 4.4 percent, to end at $49.97. The stock has ranged from $36.86 to $135.47 over the past year.

Analyst Brian Moore initiated coverage on the stock with a "Hold" rating and a $60 price target, implying he expects the stock to rise about 15 percent from Tuesday's closing price.

Moore said he sees "little room" for the company's fourth-quarter performance to beat Wall Street estimates given the difficult economic environment and the company's recent 6 percent price increase.

The analyst said the price hike "mutes our enthusiasm for the brand due to historic mixed success of similar price increases by peers."

Chipotle raised its prices in the quarter to combat higher ingredient costs — an issue affecting most restaurant operators. Although charging higher prices can help offset costs and protect a company's margins, it may also drive away price-sensitive customers and lead to lower sales.

In the longer term, Moore said the chain has a lot of potential to grow and is likely to report sales increases once the broader economy begins to rebound and customers eat out in larger numbers. Many consumers have been restricting meals out to save cash as the recession has deepened.

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