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

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:

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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.

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. 

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.

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.

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.