Chipotle (CMG) investors will notice a difference in their portfolios today.
The burrito giant conducted a 50-for-1 stock split, the company’s first-ever and one of the largest in the history of the New York Stock Exchange.
Jack Hartung, Chipotle’s chief financial officer, told investors he believes this will make the stock “more accessible to our employees as well as a broader group of investors” in a call after the company’s first-quarter results.
Shareholders who owned shares at market close on June 18 received an additional 49 shares each. When the market opened on Wednesday, shares began trading on a post-split basis, meaning that one share worth $3,283.04 at Tuesday’s close now trades for 50 shares worth roughly $65 per share at market open.
Stocks were slightly higher in midday trading.
Before the split, Chipotle stock was the third highest priced in the S&P 500 (^GSPC), after NVR, Inc. (NVR) and Booking Holdings (BKNG). Its post-split stock price is still higher than it was when the company went public in 2006 at $22 per share.
Chipotle could benefit from this split, Bernstein analyst Danilo Gargiulo told Yahoo Finance.
On the one hand, this new entry point allows “more access to retail investors” who may have turned away from the high price before the split, Gargiulo said. But on the other hand, he warned, “the stock may be exposed to a certain level of volatility a little more.”
“I don’t think it’s going to become a meme stock at all, like GameStop (GME) or others in the past, but I do think it’s exposed a little bit to more volatility,” Gargiulo added.
In a note to clients after the split, TD Cowen analyst Andrew Charles said the company believes Chipotle is “well-positioned to deliver mid-single-digit same-store sales annually over the medium term,” driven by its omnichannel approach, Chipotlane drive-through innovation and interest. Consumers with transparency of ingredients. Charles now has a price target of $72 per share.
As of market close on Tuesday, Chipotle shares were up 43% year to date on the back of a massive sales stretch, compared with a roughly 15% gain for the S&P 500. Shares of rival fast food chains McDonald’s (MCD) and Restaurant Brands (QSR) were down. By 13% and 11% respectively, with each battle facing traffic challenges.
Yum! Brands (YUM) – which owns Taco Bell, KFC and Pizza Hut – was up slightly during the year.
Some Chipotle employees will reap the benefits of the split.
Nearly 4,000 Chipotle employees, including restaurant general managers and crew members with more than 20 years of service, will receive a one-time special stock grant to celebrate the stock split, a Chipotle spokesperson told Yahoo Finance.
The scholarship will extend over three years. Additionally, U.S. employees who have been with the company for one year can enroll in an Employee Stock Purchase Plan (ESPP), which allows them to purchase stock at a discount. They can also choose to use between 1% and 15% of their compensation to help purchase the stock.
Chipotle isn’t the only company to split its stock this year.
As Yahoo Finance’s Sheena Smith reported after Nvidia’s (NVDA) 10-for-1 stock split earlier this month, stock splits are typically bullish for the companies that conduct them, with average returns after one year of 25% versus about 12%. For the broader market. According to analysis by Bank of America.
Walmart (WMT) also recently conducted a 3-for-1 stock split. Since the stock split took effect on Monday, February 26, shares of the world’s largest retailer have risen nearly 13%.
Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke De Palma Or email her at [email protected].
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