Chipotle's best-case scenario is looking pretty grim

Another analyst has turned against Chipotle.

Wedbush analyst Nick Setyan has downgraded Chipotle from neutral to underperform, saying even in the best-case scenario, the chain's sales won't recover until 2018.

Chipotle executives have told investors that sales will rebound by next year.

Sales at restaurants open at least a year, or same-restaurant sales, have plunged more than 30% in the wake of two E. coli outbreaks at restaurants in 14 states.

Even if sales fully recover, however, profits won't return to pre-outbreak levels, according to Setyan.

"Even with modest commodity inflation, we see labor and other operating expenses eroding margins," he wrote in a recent research note.

Chipotle's shares were down nearly 4% in mid-morning trading on Tuesday. The chain's shares have dropped more than 30% in the last 6 months.

Chipotle is giving out millions of free burrito offers to encourage customers to return to its restaurants in the wake of the outbreaks.

The company is expected to spend roughly $70 million on the offers between February and May 15, assuming the cost of a burrito is about $8. That's about 16% of the Chipotle's total sales last year.

Chipotle said recently that it has already redeemed about 2.5 million mobile offers - or about $20 million in free burritos.

But Setyan says he doubts the chain's ability to keep sales lifted once the coupons expire.

"We question the sustainability of a transaction recovery absent couponing and giveaways," he wrote.

Chipotle has said it will launch additional promotions targeting specific regions if traffic continues to lag. In the summer, the promotions may shift to buy-one, get-one offers so the company isn't losing so much money on every offer.