Chipotle 50:1 Stock Split, Chipotle Stock Analysis
Chipotle 50:1 Stock Split, Chipotle Stock Analysis
Chipotle just announced a 50:1 stock split. Wow! That is the highest split count I’ve ever seen. In the past few years we’ve seen Tesla do a 5:1 and 3:1 stock split, Amazon AMZN 0.00%↑and Google GOOGL 0.00%↑ both did 20:1 stock splits, but this is the first 50:1 stock split I’ve experienced. Shareholders will vote on the stock split in June.
Although stock splits do not change anything fundamentally, they definitely have a psychological effect and companies tend to do splits when things are going well.
Think of a business as a pizza pie. Whether you cut it into 8 slices or 100 slices, you still have the same amount of pizza. The same is true for the share of the company you own before and after a split. You own more shares that add up to the same amount of ownership of the business. So, now with Chipotle trading at around $3,000 a share, post split it will be around $60 a share and for every 1 share you owned prior, you will own 50 post split. While you still own the same amount of the company, this can create an influx of new buyers. How many regular people out there have $3,000 lying around to buy 1 share of Chipotle. But at $60 for 1 share, now you’re talking. This can have tremendous positive effects and is also especially helpful for employees that have stock purchase perks.
So, splits tend to be a good sign of things to come. This is really just the cherry on top of a fantastic business, which I recently did a deep dive on and you can check out here, but I’ll give a quick synopsis.
Chipotle is a business that is firing on all cylinders. They are on top of trends like mobile order amidst the fast changing retail and restaurant dynamics in recent years. In 2023, 37% of their sales came from digital.
Studies show people do not actually like having a lot of choices, it creates anxiety, Chipotle has a simple menu and streamlined process. Chipotle is on the healthier end compared with many of their quick service and fast food competitors. They pride themselves on only using 53 REAL ingredients.
They plan to double their restaurant count long term, as of January 30 there were 3,383 Chipotle locations in the USA. The CEO has said getting to 7,000 locations is a conservative target. In 2024 they expect to open 285-315 new restaurants, so they will probably get to a double in less than 10 years as efficiency continues to improve. For comparison, globally, there are over 38,000 Starbucks SBUX 0.00%↑ and over 40,000 Mcdonald’s locations MCD 0.00%↑. The company is really just beginning its international expansion so there is a massive runway for growth.
On the topic of efficiency, Chipotle restaurants continue to improve and they are also doing a lot of Chipotlanes or drive throughs that carry higher profit margins. Chipotle locations have best in class restaurant margins of 26.2% as of 2023 and steadily improving. 80% of new locations will have Chipotlanes, further improving the bottom line.
I think this is a great stock to tuck away in your portfolio for growth long term and the 50:1 stock split is just the latest incentive.
Chipotle is up 28% so far in 2024 while the S&P 500 is up 9%. I announced I started a position in Chipotle to community members earlier this year. Consider joining our community below. Until next time!
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