Restaurants

Why Chipotle will shake off E coli scare: Analyst

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The hit to Chipotle Mexican Grill from a recent E. coli outbreak may prove limited, and its shares should have room to run, one analyst said Monday.

Last week, the Centers for Disease Control said three more states reported E. coli cases, bringing the total to six states. Most people who fell ill said they ate Chipotle in the week before getting sick.

Source: Chipotle

Bob Derrington, an analyst at Telsey Advisory Group, upgraded Chipotle shares to an "outperform" rating Monday. The outbreak's effect on Chipotle appears to be waning, and excluding stores that were temporarily closed, same-store sales in the current quarter could rise slightly from the previous year, he said.

"Broadly around the U.S., I don't think it will be as negative" as in the states affected, he told CNBC's "Power Lunch."

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Derrington expects same-store sales to "build sequentially" into next year from a lower floor this quarter.

He added, though, that "all bets are off" if more states report E. coli illness.