Here's why Chipotle could finally turn things around: Strategist

Beaten-down burrito giant Chipotle could finally turn things around after its earnings report, scheduled for Tuesday, says one strategist.

"I think it's a good buy; you know, one of the best ways to make money in the market is to buy great companies when they stumble, and it appears that Chipotle has gotten a handle on all of its health problems, and now, at this point, really seems to be seeing a resurgence," Boris Schlossberg, managing director of FX strategy at BK Asset Management, said Monday on "Power Lunch."

The E. coli outbreak at the restaurant chain was declared over in February, but the stock is still down more than 13 percent year to date.

Schlossberg cites social media chatter related to lines returning to Chipotle locations and in the long term, he sees promise in the restaurant chain's expansion into Europe.

"And I think if they can catch in Europe, it's a huge new market for them that can be very interesting, and I think their menu palate could actually be very, very attractive to the Europeans."

Chipotle has currently has locations outside the U.S. in Canada, France, Germany and the U.K.

Stripping out the emotion and analyzing the stock from a technical standpoint, the future may not look as promising.

"I would be staying away from this one; I don't think the trend has come around enough," Ari Wald, head of technical analysis at Oppenheimer, said Monday on CNBC's "Power Lunch."

"The stock has been beaten up, and we are indeed seeing some signs of stabilization at this $400 level; this is a very important level," Wald said, examining a four-year chart of Chipotle, noting shares are trading below its 200-day moving average "in a defying downtrend," and a base has formed over the last year near the $400 mark.


Chipotle has not broken through $440, Wald notes as a key level of resistance.

On average, analysts give Chipotle Mexican Grill a hold rating, according to FactSet estimates. Analysts' average target price is $425.96, about 3 percent higher than the stock's closing price Monday.

In a note published Friday entitled "Expect Another Casual-Dining-Led Miss-and-Cut Season," Stifel Nicolaus analyst Paul Westra wrote that top "sell ideas" include Chipotle, Panera Bread, The Cheesecake Factory and Darden Restaurants, deeming the current environment an ongoing "U.S. restaurant recession."

"We'd rather, if you get a pop, to sell it, rather than if you get a drop, to buy it," Oppenheimer's Wald said.


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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