The CMG Stock Price Will Continue to Plummet in 2016

The CMG stock price is down over 30% since October. The latest outbreaks reported from Maryland mean the CMG stock price has even further to fall in 2016…The CMG stock price fell 3.35% by mid-afternoon trading today (Monday) after a report from the Centers for Disease Control and Prevention Friday said Chipotle's E. coli outbreak has spread to new states.

The E. coli outbreak has now spread to California, Minnesota, New York, Maryland, Pennsylvania, and Ohio. Cases were first discovered in Oregon and Washington in early November. The Associated Press reports that 52 individuals have been sickened by the outbreak.

Since closing on Oct. 1 at $724.43, the CMG stock price has now plummeted 28.9% to today's low price of $515.

Chipotle Mexican Grill Inc. (NYSE: CMG) told investors in a regulatory filing that sales could decrease even further as more cases are discovered.

Money Morning Technical Trading Specialist D.R. Barton warned our readers that the CMG stock price would continue to fall before Thanksgiving. Since then, CMG stock is down 11.87%.

While some investors may view this as an opportunity to build up a discounted position in CMG stock, there is still a one major reason why the CMG stock price will continue to fall...

The CMG Stock Price Will Continue to Fall Into 2016

The CMG stock price will continue to plummet until the source of the E. coli outbreak is identified.

Without an identifiable source, Chipotle cannot even begin to estimate the scope of the outbreak. As more and more cases are reported, it means Chipotle has less control of the situation.

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Barton warns investors that the CMG stock price will be extremely volatile in the foreseeable future.

"In the intermediate term, I don't like Chipotle," Barton stated. But he said he still likes the stock in the long term.

You see, previous E. coli outbreaks suggest that the CMG stock price is going to be extremely volatile, even in 2016...

In 1993, 623 people contracted E. coli from fast-food chain Jack in the Box. Four children died after coming into contact with the bacteria, and many of the affected individuals suffered long-term complications. In 2006, 71 cases of E. coli were reported by Taco Bell patrons. Taco Bell's lettuce was the source of the outbreak.

And these types of health issues can have big impacts on food stocks...

When there were issues with the quality of meat that McDonald's Corp. (NYSE: MCD) was purchasing for its Japanese restaurants in July 2013, MCD stock dropped 4.49% from the end of July to the end of August.

There is no set timetable on when former customers will feel comfortable enough to start dining at Chipotle again, which makes the CMG stock price extremely volatile heading into 2016.

Because of the E. coli outbreaks, analysts are drastically lowering price targets for CMG stock. Analysts at the Maxim Group lowered their price target from $718.00 to $585. Bank of America provided an even lower price target, dropping its recommendation from $750 to $470. The analysts from Sterne Agee downgraded the CMG stock price from "Buy" to "Neutral," but kept the same price target of $766.

The Bottom Line: The CMG stock price will continue to plummet now and in 2016 because the source of the outbreak is unknown. Chipotle has zero confidence that all the outbreaks are contained and warned CMG shareholders that sales will continue to fall.

Jack Delaney is an associate editor for Money Morning. You can follow him on Twitter and follow Money Morning on Facebook.

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