In a stock picker’s market, Chipotle Mexican Grill Inc. (NYSE:CMG) continues to deliver for shareholders. The company reported earnings on April 25, 2024, and the numbers were sensational.
On a year-over-year (YOY) basis, revenue of $2.7 billion was 14.1% higher with digital sales accounting for 37% of revenue. Adjusted diluted earnings per share (EPS) came in at $13.37, which was 27.3% higher.
And the good news didn’t stop there. Comparable store sales, operating margin, restaurant level operating margin were all higher YOY. Plus, at a time when the industry is going through contraction, Chipotle opened 47 new locations.
Not surprisingly, CMG stock is up almost 11% since the report was released. This is despite the fact the stock is already up 59% for the year and 39% in 2024. Plus, analysts continue to raise their price targets which gives the stock room to move higher.
It’s Expensive But May Be Worth It
No, I’m not talking about the company’s products, although Chipotle has been successfully passing along some of its inflated production costs. I’m talking about its stock that trades at 58x forward earnings. That being said, analysts are projecting 21.4% earnings growth in the next 12 months. And if the first quarter is any indication that number may be too low.
There are those that say a stock is worth whatever someone is willing to pay for it. That may be the case with Chipotle. However, even if you’re bullish about the stock, there is a good reason to wait before you jump in.
CMG Stock Is About To Feel A Lot Cheaper
Pending shareholder approval at the company’s annual meeting on June 6, 2024, CMG stock will undergo a 50-for-1 stock split. The company’s stock will trade at its new price (on a post-split basis) when the market opens on June 26, 2024.
At the current price of around $3,178, CMG stock will trade for around $63.50 per share post after the split. But just because it will carry a cheaper stock price won’t make the stock cheaper. The company’s market cap won’t change, nor will it become cheaper based on fundamentals like its price-to-earnings (P/E) ratio.
What will change, perhaps, is investor psychology. When a stock trades for several hundred dollars per share, many investors will stay away because, if they prefer to buy whole shares, those stocks will be unattainable to buy in a meaningful quantity.
But at $63.50, a $5,000 investment can buy approximately 78 shares. If the stock moves higher, which it almost certainly will, the value of each of those shares moves higher with it.
Traders may try to capitalize on the earnings report to drive the share price higher before the split. So, if you’re looking to take a long position in CMG stock, you should wait for the split to be executed before you jump on this opportunity. Even then, like the company’s Carne Asada, this split-adjusted price will only be available for a limited time. Be prepared to move fast because the stock surely will be.