Aggressive promotion efforts may not save Chipotle

A Chipotle restaurant in New York.
Scott Mlyn | CNBC

Chipotle may have given the store away with all those free burritos. Credit Suisse on Monday lowered its forecasts for Chipotle, citing the fast-casual chain's heavy marketing campaigns in the decision

The mobile and mailed-coupon "efforts have likely helped traffic in recent weeks, but at the expense of 'real' sales," analysts said in a research note.

Credit Suisse now expects Chipotle's same-store sales in the first quarter to drop 30 percent, down from a previously anticipated 25 percent fall. Its analysts also lowered the earnings-per-share estimate for Chipotle, expecting a loss of 21 cents per share instead of a gain of 22 cents.

Chipotle did not immediately respond to CNBC's request for comment.

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The burrito restaurant has offered free entree promotions to help bring customers back to stores following several foodborne-illness outbreaks.

The campaign has had some success, with consumers reporting more willingness to eat at the chain in recent weeks, according to a survey released last week by William Blair. Chipotle has also seen increases in foot traffic since the Center for Disease Control and Prevention declared the company's E. coli outbreak over last month.

However, analysts at Sterne Agee CRT believe Chipotle will see a rapid deceleration in customers following its highly promotional campaigns in mid-February.

"As such, we believe it is likely that March will show a sequential deceleration in traffic trends versus February, which could be disappointing to the Street," Sterne Agee CRT analysts said in a research note last week.

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Credit Suisse is not the only institution to balk at Chipotle's attempted comeback. Deutsche Bank downgraded the stock to a "sell" and lowered its target expectations, citing a lack of faith in the company's ability to recover.The bank's analysts foresaw a 24 percent drop in Chipotle's stock price, a plunge to $400 from its Feb. 22 price of $525.90.

"We still question what a recovery will look like (and when it will materialize)," Deutsche Bank analysts said in a research note in late February. They said that while management has been proactive in "trying to regain consistency and customer trust, there is tremendous uncertainty on how well they will be received."

BMO Capital Markets also lowered its target price for Chipotle, though it still gives it a "buy" rating.