Shares of Chipotle Mexican Grill (CMG) are reaching all-time highs following the company’s positive first-quarter results and an increase in its comps outlook for the year. The momentum in CMG stock has been steadily rising since it announced a 50-for-1 stock split, the first ever since its IPO in 2006. The question now remains, is Chipotle stock still a viable buy ahead of its impending stock split?
Chipotle’s decision to split its stock comes at a time when the stock is trading at record highs, making it more accessible and appealing to a wider range of investors, including Chipotle’s own employees who will receive a special equity grant. The move has also sparked speculation that Chipotle may be vying for a spot in the prestigious Dow 30 following Amazon’s lead, as high-priced stocks are typically excluded from the index due to its price-weighted structure. The stock split proposal is set for a shareholder vote on June 6, with shares expected to trade on a post-split basis starting June 26.
Despite its high valuation metrics, Chipotle has shown resilience and growth in the face of rising input costs and wages, with a transaction growth of 5.4% in the first quarter of 2024 and a 7% rise in same-store sales driven by menu price hikes. The company’s profitable growth is expected to continue, with revenue projected to grow by 14% in 2024 and 2025, and earnings per share estimated to increase to $55.55 for 2024 and $66.69 for 2025. Chipotle’s recent first-quarter results showcased strong net income and sales growth, leading to an optimistic outlook for the year.
Chipotle’s long-term growth drivers include expanding its restaurant footprint both domestically and internationally, improving throughput to drive incremental transactions, and leveraging its food-with-integrity business model to appeal to health-conscious consumers. With plans to open more restaurants with drive-thrus and increase its international presence, Chipotle is poised for continued growth. Despite the risks associated with a competitive market and food safety concerns, Chipotle’s strong business model and growth prospects make it an attractive investment option.
Investors looking to capitalize on Chipotle’s growth potential may find the stock appealing ahead of the stock split, as the company’s future outlook remains positive. While there may be volatility in the near term, Chipotle’s strong fundamentals and growth drivers make it a compelling long-term investment. Additionally, the upcoming shareholder vote on the stock split could serve as a catalyst for further price appreciation. For investors seeking diversified investments, exploring stock index funds may also offer exposure to overall market trends. Overall, CMG stock presents a buy opportunity for investors willing to ride out potential fluctuations and focus on the company’s growth trajectory.
