Why One Analyst Turned Bullish on Starbucks and Cooled on Chipotle

Tuesday’s news that Chipotle (CMG) CEO Brian Niccol is leaving to take the same role at Starbucks (SBUX) sent the companies’ stocks in opposite directions. It also led analysts to reevaluate the companies, with Baird’s David Tarantino upgrading Starbucks and lowering Chipotle’s price target.

Tarantino upgraded Starbucks to “outperform” from “neutral,” raising the coffee giant’s price target to $110 from $81. He also lowered his price target for Chipotle stock to $62 from $74, maintaining an “outperform” rating on the fast casual chain.

Starbucks stock soared more than 24% Tuesday, nearly erasing all of the stock’s losses since the start of the year. Chipotle stock sank more than 7%.

“While we acknowledge that near-term results could remain challenged as the company navigates a difficult economy, we now expect sentiment on SBUX to be positive as investors anticipate better fundamentals for the company to emerge over the next 12+ months,” Tarantino wrote Tuesday.

Tarantino said the news is likely to weigh on Chipotle in the near term as the chain loses an “exceptional executive” who has been a “key factor” in the company’s success over the last several years. But the news likely won’t mark the end of Chipotle’s growth story, he wrote, as it still has an executive team with the “skills and expertise” to continue Chipotle’s “good operating momentum.”

Other analysts shared similar thoughts Tuesday. Raymond James analyst Brian Vaccaro said Chipotle’s downward stock move is typical of the “knee-jerk reaction” when a “rock star executive” leaves, but could also create an “attractive buying opportunity” as other factors of Chipotle’s positive momentum remain intact.