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Chipotle Mexican Grill Inc (NYSE:CMG) saw its stock fall 6% Thursday, after BMO Capital Markets downgraded the fast-casual chain, cutting its price target to $620 from $675 and saying higher pork prices due to global outbreaks of African swine fever could put pressure on margins.
The action marked Chipotle's worst trading day in six months.
Now, even with the arrival of new menu items, boost digital sales and drive more store traffic, some experts are expecting more pain ahead.
Strategic Wealth Partners CEO Mark Tepper, for one, said that even if the African swine fever outbreaks don't represent actual food safety concerns like the ones that have slammed Chipotle shares in the past, the company isn't free from potential pain.
"It's going to drive up the protein costs for them," says Tepper, "and the Street's already overly optimistic on their margins. They've seen a huge rebound in margins. And increasing costs are going to hurt their margins."
Mark Newton, president and founder of Newton Advisors, is also playing it safe.
"It certainly seems like we've seen momentum start to roll over a little bit in recent weeks, so I'd be a buyer, really, on pullbacks down to $600. I just don't know if I want to touch it here," he said. "We've definitely seen some evidence of slowing of late and that makes me a little bit cautious before stepping in right now."
Shares gained $3.43, however, on Friday to $668.97
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