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."
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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
-
Think Twice Before Getting a Credit Card Cash AdvanceA credit card cash advance can be a quick solution when you need emergency help with money. But you'll pay for the convenience with high interest and fees.
-
What is AI Worth to the Economy?The Letter Spending on AI is already boosting GDP, but will the massive outlays being poured into the technology deliver faster economic growth in the long run?
-
9 Warren Buffett Quotes for Investors to Live ByWarren Buffett transformed Berkshire Hathaway from a struggling textile firm to a sprawling conglomerate and investment vehicle. Here's how he did it.
-
I'm a Financial Adviser: Three Things You Will Wish You Did Before the Fed Cuts Interest RatesWith potential interest rate cuts on the horizon, you might want to lock in today's higher yields and consider adjusting your asset allocation.
-
Simple Ways to Save on Back-to-School Shopping This YearSet a budget and stick to it, scour the house for what you already have, decorate backpacks and lunch boxes with your kids and consider buying some items during holiday sales.
-
Stocks End Strong Month on a Down Note: Stock Market TodayThere was likely a bit of profit-taking ahead of a historically weak September.
-
If You'd Put $1,000 Into UnitedHealth Group Stock 20 Years Ago, Here's What You'd Have TodayUNH stock was a massive market beater for ages – until it wasn't.
-
The Seven-Day Financial Reset: A Simple Plan to Get Control of Your Money, From an ExpertSometimes, getting unstuck requires a reset. These practical steps can help you tackle your money issues and feel less overwhelmed by it all.
-
Three Pros (and Four Cons) of Hiring Multiple Financial Advisers: The View From a Financial AdviserThere's nothing to stop you from working with several financial advisers instead of just one. But take a balanced view of the risks and rewards first.
-
S&P 500 Tops 6,500 Even as Nvidia Slips: Stock Market TodayThe world's most valuable company closed lower after earnings, but the S&P 500 managed to notch a new record high.
