Chipotle Mexican Grill (CMG) has given long-term investors plenty to cheer about. Over the past 15 years, Chipotle stock has averaged an annual gain of 28%, easily outpacing the S&P 500's 14.8% total return (price change plus dividends). And the burrito chain's next move could encourage a new crop of folks to look CMG's way.
After the close on Tuesday, June 25, Chipotle underwent a massive 50-for-1 stock split. And CMG stock will begin trading on a post-split basis at the open on Wednesday, June 26.
This marks the first stock split for CMG and one of the biggest in the history of the New York Stock Exchange (NYSE). The split "will make our stock more accessible to employees as well as a broader range of investors," Jack Hartung, chief financial officer of Chipotle, said when the news was first announced back in March. "This split comes at a time when our stock is experiencing an all-time high driven by record revenues, profits, and growth."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Indeed, in its first-quarter earnings report, Chipotle disclosed 14.1% year-over-year revenue growth to $2.7 billion. Earnings surged 37% to $13.37 per share. For the second quarter, analysts expect revenue to jump 16% and earnings per share to rise by 23%.
What does the Chipotle stock split mean?
As for Chipotle's stock split, it won't change anything about the company's fundamentals or market valuation. Rather, a stock split is similar to making change. In CMG's case, it will be equivalent to breaking a $50 bill into 50 $1 bills.
Based on CMG's June 25 close at $3,283, the 50-for-1 stock split will bring the share price to a little over $66. This should make it much more attractive for retail investors, as well as Chipotle employees participating in the company's stock purchase plan, who are unable to buy CMG stock at its four-figure share price.
Walmart (WMT) underwent a similar stock split earlier this year. The retailer cited the importance of keeping its "share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates" as the reason behind its 3-for-1 stock split.
Nvidia (NVDA) also split its stock recently, while fellow chipmaker Broadcom (AVGO) also announced a major stock split in its fiscal second-quarter earnings report.
Wall Street says Chipotle stock's still a buy
After the news initially broke, Deutsche Bank analyst Lauren Silberman reiterated her Buy rating on Chipotle stock. "CMG has been among the best-performing restaurant stocks and we expect fundamental strength to continue to drive outperformance," Silberman writes in a note to clients.
The analyst adds that she has high conviction in Chipotle's near- and long-term growth outlooks. She believes "a premium multiple is warranted, noting there is scarcity value for a high-quality U.S. company with a clean balance sheet, strong fundamentals and potential upside to numbers."
Silberman is hardly alone in her bullish outlook toward the consumer discretionary stock. Of the 35 analysts covering Chipotle stock tracked by S&P Global Market Intelligence, 21 say it's a Strong Buy, two have it at Buy, 11 rate it a Hold and one has it at Strong Sell. This works out to a consensus Buy rating and with high conviction.
Related Content
-
The Surprising Truth About Loneliness and LongevityWe've all heard about the epidemic of loneliness that can shorten lives and make retirement miserable. But there's more to the story.
-
The Dollar Index Is Sliding. Is Your Portfolio Prepared?The Dollar Index Is Sliding. Is Your Portfolio Prepared? The dollar's fall has been troubling because inflation appears to be constrained and the economy has been strong. Here's what it means for investors.
-
The Dollar Index Is Sliding. Is Your Portfolio Prepared?
The Dollar Index Is Sliding. Is Your Portfolio Prepared? The dollar's fall has been troubling because inflation appears to be constrained and the economy has been strong. Here's what it means for investors.
-
Seven Financial Considerations When Downsizing for RetirementWith prices going up on everything, you may be looking for a cheaper place to live. To truly evaluate costs, take a hard look at taxes and intangibles.
-
I Have Plenty of Money: Why Do I Need a Long-Term Care Plan?Long-term care planning, whether through insurance or self-funding, is crucial not only for financial protection but also to preserve family relationships and reduce the emotional and logistical burdens on loved ones.
-
The GENIUS, CLARITY, and Anti-CBDC Acts: What Bitcoin Investors Need to KnowMovement on the crypto front at the federal level has the potential to usher in substantial change. Here's what it means for your portfolio.
-
Wellness Stocks to Invest in NowBreakthroughs that help us live longer, healthier lives can also create opportunities for investors.
-
Three Steps for Evaluating a Downsize in Retirement: A Financial Planner's GuideUnless you think things through, you could end up with major (and costly) regrets. To make the right choice, base it on the three keys to retirement happiness.
-
Worried About Your Retirement Income? Four Questions to Ask Yourself, From a Financial PlannerIf you're nearing or in retirement and stressing about your retirement income (so many of us are), consider taking some time to think about these four issues.
-
Stock Market Today: Stocks Step Back From New HighsInvestors, traders and speculators continue the low-volume summer grind against now-familiar uncertainties.
