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 Power of Compound Interest: How to Turn Small Investments Into Big WealthThe key is understanding how it works and how to maximize its potential to build financial security.
-
How to Create a Family Dynasty for Lasting SecurityThe super-rich rely on the family dynasty model to pass assets down from generation to generation. Here's how to embrace those strategies.
-
Alternative Investments Under Trump: What You Need to KnowAs access to alternative markets opens up, retail investors looking to enhance their long-term financial outcomes have more opportunities to carefully consider.
-
Beware of TV/Billboard Personal Injury Law Firms: Here's WhyIf you or someone you know is tempted to hire a so-called settlement mill to handle a personal injury case, here are some reasons to reconsider.
-
How Small Businesses Can Clear the Economic Hurdles AheadShifting rules on taxes, trade and regulation are creating uncertainty for SMBs. Owners can overcome that by focusing on efficiency, flexibility and investment.
-
Stock Market Today: Dow Adds 353 Points Despite Soft Retail SalesInvestors and traders shake off another set of shaky economic numbers and send 10 of 11 sectors higher on Monday.
-
CoreWeave IPO: Should You Buy CRWV Stock?The CoreWeave IPO will mark the biggest public offering of the year, with the AI cloud company expected to start trading on the Nasdaq in late March.
-
Nvidia Stock's Been Growing for Years. Just Look At Its 100,000% ReturnNvidia shareholders have had to stomach intense volatility over the years, but they have come out on top thanks to the AI chipmaker's bellwether status.
-
10 Tax Topics Every Retiree Should Know AboutA little knowledge can go a long way toward saving on your tax bill. Print this out and take it to your tax planner so you can have a productive chat.
-
It's No Surprise That Berkshire Hathaway's in the 100,000% Return ClubWarren Buffett's fascination with the insurance industry has helped Berkshire Hathaway's stock return snowball.
