Chipotle Just Completed Its Stock Split: Here's What Happens Next
Chipotle's 50-to-1 Stock Split: What You Need to Know
Should You Invest $1,000 in Chipotle Mexican Grill Right Now?
Chipotle Mexican Grill (NYSE: CMG) has announced a historic 50-to-1 stock split, set to take effect on Wednesday. This is the first stock split in the company’s three-decade history, aimed at making its shares more affordable and accessible to a broader range of investors.
Why the Stock Split?
Chipotle’s stock price has surged nearly 350% over the past five years, reaching a high of $3,283.04 per share as of Tuesday’s close. By splitting the stock, Chipotle aims to make its shares appear more affordable to investors who might hesitate to invest thousands of dollars in a single share. Chief Financial Officer John Hartung noted that the split would also make the shares "more accessible to our employees" and a wider range of investors.
Details of the Stock Split
The stock split goes into effect at the start of trading on Wednesday, June 26. Investors who owned Chipotle stock as of June 18 will receive 49 additional shares for each share they owned. As a result, Chipotle shares will start trading at approximately $65.66 per share on Wednesday morning, down from the previous close of over $3,000.
Impact on Market Value and Shareholders
The stock split will not change Chipotle’s market capitalization, which stands at about $90.1 billion. The split merely resets the value of each share at a lower price, maintaining the overall market value. This mechanical adjustment does not alter the value of current holdings or the stock’s valuation. The move is designed to broaden the investment opportunity without affecting the company’s market value.
Chipotle Just Completed Its Stock Split: Here's What Happens Next
This follows years of revenue growth for Chipotle, proving its brand strength even during difficult times such as the pandemic lockdowns. The company has been expanding its locations both domestically and internationally, attracting more diners and investors alike. In its most recent quarter, Chipotle reported a 14% increase in revenue to $2.7 billion and an operating margin of 16.3%, up from 15.5% the previous year.
Chipotle’s strategy includes a limited menu featuring fresh products and a strong digital platform, which has increased the number of Chipotlanes (pickup windows) and streamlined the ordering process. The company plans to expand from its current 3,500 locations to 7,000 in North America and is also growing internationally, with new leadership focused on Europe.
Should You Invest $1,000 in Chipotle Mexican Grill Right Now?
While the stock split makes Chipotle’s shares more accessible, it does not change the stock's valuation. Chipotle’s shares remain expensive for a restaurant operator, trading at 57 times forward earnings estimates. This high valuation might deter value investors, but growth investors might consider adding Chipotle to their portfolios as part of a buy-and-hold strategy, given its strong brand and expansion plans.
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Conclusion
Chipotle’s 50-to-1 stock split is a significant move that aims to make its shares more accessible to a broader range of investors. The company’s solid growth trajectory and strategic expansion plans suggest that it could continue to perform well in the future. However, investors should consider their investment strategies and the stock’s high valuation before making a decision. While growth investors may see potential in Chipotle's long-term prospects, value investors might want to look elsewhere given the current high valuation of its shares.