Chipotle Mexican Grill (CMG) narrative is not likely to change quickly and its sales drivers are less impactful, Morgan Stanley said in a note Wednesday.
"The stock has lagged, but we don't see the narrative changing;
lower multiple vs history seems appropriate," the note said.
Morgan Stanley downgraded Chipotle to equal-weight from overweight and cut its price target to $37 from $49.
The note said the overweight rating was based on structural tailwinds, new sales drivers after a slow 2025, leading unit growth, margin recovery, and tech benefits.
"Most of these have underwhelmed vs our expectations," it said.
The report said the downgrade is also reflecting the dominant investor view that CMG likely faces a future of more modest comps and margin expansion.
"CMG remains on-trend - it is not a structural loser, and
something we'd look to recommend again, but this does seem like a new phase of its lifecycle," the note said.
Meanwhile, Morgan Stanley upgraded Yum! Brands (YUM) to overweight from equal-weight and lifted its price target to $185 from $180.
The report said Yum! has the best growth profile among major franchised quick service restaurant companies and solid brands are undervalued.
Price: $28.70, Change: $-0.57, Percent Change: -1.93%