The time has finally come. On June 16, shares of Chipotle Mexican Grill (NYSE: CMG) underwent a closely watched and historic 50-for-1 stock split. The previous four-figure price tag of the stock is currently at about $65.
Management felt this was the right proposal, given how well the restaurant company’s shares have been performing. They’re up 44% in 2024, and in the past five years, have soared 348%.
Is this magnificent restaurant stock a no-brainer investment opportunity right after its 50-for-1 stock split?
No fundamental changes
Stock splits typically happen after a company’s nominal share price gets too high. Of course, this is a good problem to have for Chipotle because it means the stock has done well for investors over the years. But by artificially cutting the price, the stock can be accessible to more investors.
Chipotle’s outstanding share count expanded 50-fold to 1.4 billion. And the share price is now 1/50th what it was before this event. It’s helpful to think of this situation as a pizza being cut into smaller slices.
It’s really important to remember that from a fundamental perspective, nothing has changed with Chipotle. This is still the same business it was yesterday. Through its fast-casual stores, this company still sells Tex-Mex food like bowls and burritos.
Since the executive team first announced the stock split in March, shares have climbed 17%. Perhaps the anticipation of this happening is precisely what has driven even greater bullish sentiment from the market.
Curb your appetite
As we view the company and stock today to assess if Chipotle is a no-brainer investment opportunity, it’s critical to consider the quality of the company. This is a stellar business.
The company continues to post strong financial results, despite ongoing macro headwinds. After revenue jumped 14.3% in 2023, it rose 14.1% in Q1 2024 (ended March 31). This was boosted by same-store sales growth of 7%, as well as the opening of 47 new restaurants.
Chipotle is extremely profitable, which is supported by its proven pricing power. In the past five years, the company’s…
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