Morgan Stanley upgraded Chipotle to overweight from in line, saying the company's turnaround is working.

"CMG is still early into a sales turnaround and has an attractive management change narrative and earnings recovery story," analyst John Glass said in a note Wednesday.

"While still early days in the brand's long-awaited recovery, there is increasing evidence that makes our bull case scenario more believable, including (1) a change in management, with an incentive plan designed to deliver the bull case in earnings (+$20 in EPS), (2) plenty of low hanging opportunities in marketing, product development and operational initiatives to drive sales, and (3) a more benign competitive environment," Glass added.

Shares of Chipotle rose 2.8 percent in premarket trading following the Morgan Stanley note.

The appointment earlier this year of Brian Niccol as chief executive officer after his successful track record at Taco Bell has Wall Street optimistic that the burrito chain will be able to drive more innovation with new offerings.

"Job No. 1 is to remind people why they love Chipotle," Niccol told CNBC in March. "I think there [are] opportunities to use what we have and present it in new forms, new varieties, to get people re-engaged with what they love about Chipotle."

Such initiatives are likely welcome news to investors like Pershing Square activist Bill Ackman, who has leveraged a 10 percent stake in the company to encourage ideas like drive-thrus and breakfast offerings to reignite the beleaguered shares following a series of food safety issues.

Chipotle shares are up 70 percent this year, and Morgan Stanley thinks that run will continue. It raised its 12-month price target to $600 a share. The stock closed Tuesday at $493.32.