Chipotle stock tanked after the CEO left for Starbucks. But analysts say it's 'in very good hands'

Chipotle (CMG) “remains in very goods hands,” even after a C-Suite shake up that briefly startled Wall Street, Wedbush analyst Nick Setyan said in a research note.

Brian Niccol, who is set to leave his post as Chipotle’s CEO at the end of the month in exchange for the same role at Starbucks (SBUX) in early September, prompted Chipotle’s stock to fall following the news on Tuesday.

Despite the stock dip, Setyan is optimistic about the company’s future. He upgraded Chipotle’s stock rating to “outperform” from “neutral,” and raised his stock price target from $54 to $58.

Setyan pointed out that in terms of leadership, Scott Boatwright, the chain’s COO, will step in as interim CEO. Boatwright has served in that position since 2017. Jack Hartung, who is set to retire as CFO next year, will leave his CFO position but will stay with Chipotle as its president of strategy, finance, and supply chain.

“We credit both leaders with CMG’s turnaround in addition to Brian Niccol, and believe the company is both in a good place and in good hands,” he said.

Chipotle’s sales growth for the second half of the year is expected to be strong, albeit slightly below the firm’s earlier forecasts, Setyan said. Menu prices in the third quarter are likely to remain similar to those in the second quarter. The chain has increased its prices by 7%.

During it’s most recent earnings call, Chipotle executives said that its popular Chicken al pastor would end at the end of the summer, but that it would re-introduce its popular Brisket. With the return of the popular menu item, and adjustments to its portion sizes (which have been at the center of social media backlash), it should have a stable performance going into the fourth quarter and into early next year.

Seytan later noted that other positive factors likely to boost Chipotle’s profitability, include the “steep decline” of avocados, which have dropped significantly since July’s peak.