Analyst: Reasons to be hopeful on Chipotle

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Earnings stink, Chipotle sinks
Chipotle shares slip after earnings miss

Despite Chipotle's earnings miss this week, an analyst said that there is still hope for the fast casual restaurant chain in the coming years.

"This brand is the choice of a new generation, it's the millennials' favorite fast casual brand, so there is reasons to really be hopeful that they're gonna get it going on comps [same store sales]," David Palmer, RBC Capital markets analyst, told CNBC's "Squawk on the Street" Wednesday.

Shares were lower on Wednesday after the company reported an earnings miss a day earlier. Chipotle's sales growth at established restaurants grew at a much slower rate in the third quarter, sending the company's shares down 6.4 percent in extended trading on Tuesday.

Its same-store sales rose 2.6 percent in Q3 2015, compared to a 19.8 percent increase for the same quarter last year. This quarter edged above a Consensus Metrix estimate of 2.5 percent. It was mostly driven by an increase in transactions with a 0.7 percent increase from a price hike in steak and barbacoa in some markets.

A Chipotle restaurant in New York.
Chipotle stock falls after earnings disappoint

Palmer said that dip in price is a chance for investors to get in and play a longer-term game. "[The price] is reasonable for something with this return and growth," he said.

He also pointed to an opportunity for Chipotle to grow its mobile orders, currently at 7 percent. "It looks like mobile orders is going to be something of an emphasis in the years ahead, and is an opportunity for comps."

Bob Derrington, an analyst with Telsey Advisors, lowered his price target for the stock off the earnings news. He said that the fast casual dining industry is lapping strong trends from the previous year and all brands are competing to grow.

"Consumers have never had more options, and especially at pretty attractive price points," he told CNBC's "Power Lunch" on Wednesday. "So Chipotle, while it may be a differentiated business model, they're competing with the rest of the industry, and the industry keeps getting tougher and tougher."

Disclosures: Neither analyst nor his respective firm owns shares of Chipotle. However, Chipotle is or was an investment banking client of Telsey Advisors.

— CNBC's Katie Little and Reuters contributed to this report.