Chipotle Mexican Grill’s search for a new chief executive adds uncertainty to the restaurant’s earnings trends, according to William Blair, which downgraded the shares Thursday.
Even if Chipotle finds a new CEO quickly, the addition of a new company leader often results in a costly few transition years, wrote analyst Sharon Zackfia.
“While ultimately the move may prove a positive over the long term and accelerate the company’s turnaround, it also likely signals that trends remain under pressure and creates more near-term uncertainty until a successor is announced,” she wrote on Wednesday. “As a result, we are downgrading the stock to Market Perform.”
Chipotle announced Wednesday that it’s begun to search for a new CEO, with current chief and Founder Steve Ells becoming executive chairman. Ells and two others have been tasked with finding the new executive, the company said.
Chipotle shares rallied on the news of the leadership change and closed more than 5 percent higher Wednesday. Shares were slightly lower in premarket trading.
Foodborne illness outbreaks have plagued Chipotle as of late. Most recently, a norovirus outbreak at its Sterling, Virginia restaurant circulated in July only pushed customers farther away. The company has faced similar outbreaks since over the past few years.
The company did not immediately respond to CNBC’s request for comment on the report.
Source: Investment Cnbc
Chipotle downgraded on fear leadership shake-up means earnings may disappoint in the near term