Is the Chipotle (NYSE:CMG) 50-1 Stock Split a Good Thing for Investors?

The company's 50-to-1 split is set to take place on June 26.

By Laura Ratliff

Edited by Lauren Gordon

Updated June 25, 2024

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

Following in the footsteps of Nvidia and Nintendo, another historic stock split is coming — this time for fast-casual favorite Chipotle Mexican Grill. While Nvidia's split was 10-for-1, Chipotle plans to divide its shares 50-for-1.

This move has investors wondering if they can expect a similar boost in stock price and make it an easy way to grow their wealth. Here’s what this split entails and its potential implications:

Featured partner offer

All-In-One Investing App That Truly Does It All

4.2

Robinhood Benefits

Buy and sell stocks 24 hours a day, 5 days a week with Robinhood's "24 Hour Market"
Commission-free trading (other fees may apply)
No account minimum
Trade stocks, options, ETFs, and more
Earn 5.00% APY¹ on your uninvested cash with Robinhood Gold, subscription fee applies

4.2

Join Robinhood here

How Chipotle's stock split will work

A stock split increases the number of shares available by issuing new stock to shareholders, which reduces the share price proportionally. Chipotle’s 50-for-1 stock split means that shareholders will receive 49 additional shares for every share owned after the market closes on June 25.

This doesn't increase their portfolio's total value, but it makes individual shares more affordable, potentially attracting more investors.

Want to learn how to build wealth like the 1%? Sign up for Worthy to get ideas and advice delivered to your inbox.

Impact on Chipotle's stock price

The biggest benefit of a stock split is making shares more accessible to retail investors, which ultimately increases trading volume and potentially boosts the stock price.

But like all things investing, this isn’t guaranteed. Nvidia saw a 10% increase after its split, but Chipotle's outcome may differ.

A growing fast-casual giant

Chipotle has grown by leaps and bounds in the quick-service restaurant markets, outpacing McDonald’s and Yum! Brands Taco Bell, Pizza Hut, and KFC.

Even in 2020, an understandably tough year for restaurants, Chipotle’s revenue increased by more than 7%, while McDonald’s saw a drop. Additionally, the company expects an earnings-per-share growth of more than 50% in 2024.

Get a free stock valued between $5 to $200

Secret: You don't need thousands of dollars to buy thousand-dollar stocks or create a diverse portfolio.

Robinhood offers a method of investing called “fractional shares.” On its own, one share of a single stock could cost a lot of money, making it difficult to diversify. Robinhood allows you to buy pieces of stock instead, so you have the option to build a diverse portfolio quickly.

Let’s say you want to invest $250, as an example.

With that amount, you could build a relatively diverse portfolio with an investment of $50 in a big tech stock, $50 in a retail stock, $50 in an energy stock, $50 in a manufacturing stock, and $50 in a bank.²

Even better news? Add a Robinhood Gold membership, and you’ll get access to 5.00% APY¹on your uninvested cash³and the ability to buy and sell stocks 24 hours a day, 5 days a week.

Open and fund a Robinhood account and earn up to $200 in stock

Things to consider

Even though the brand has grown considerably, investors note that this growth is solely driven by a reliance on expansion versus store sales. Still, store sales increased by 7% in the first quarter of 2024, and the company’s stock is valued more highly than its competitors relative to Chipotle’s earnings.

Bottom line

Chipotle’s upcoming stock split is a big deal since it will make shares more accessible to investors. But even though there will be more trading activity surrounding the company, investors should consider its long-term prospects.

Chipotle has historically shown exponential growth and resilience, but it’s worth monitoring its comparable-store sales and market performance before deciding to start investing.

More from FinanceBuzz: