Chipotle Mexican Grill (NYSE: CMG), known for its fast-casual dining experience and focus on fresh ingredients, recently announced a significant 50-for-1 stock split. This move, the first of its kind for Chipotle since going public, dramatically increases the number of available shares, making the stock more accessible to a broader range of investors. While a stock split itself doesn’t inherently increase a company’s value, it’s often interpreted as a positive sign, indicating management’s confidence in future growth. Prior to the split, CMG stock closed near $3280 on Tuesday, June 25th. Following the split, the stock began trading around $66 per share as of June 26th.
This stock split arrives as Chipotle demonstrates robust financial health and market outperformance. Trefis has adjusted its valuation for Chipotle to $66 per share post-split (previously $2794 pre-split), aligning with a projected EPS of $1.12 and a P/E multiple of 58.8x for fiscal year 2024. Revenue forecasts for the same period are set at $11.4 billion, representing a 15% year-over-year increase. Year-to-date, CMG stock has surged by 44%. This contrasts sharply with competitor McDonald’s (NYSE: MCD), whose stock has declined by 13% in the same period. Chipotle’s impressive performance is fueled by expanding restaurant operating margins, innovative menu additions, strategic price adjustments, and effective execution of its digital initiatives. The stock split announcement has further amplified investor interest and market momentum.
Over a longer timeframe, CMG stock has delivered substantial gains, soaring 115% from approximately $30 in early January 2021 to its current level around $66. This significantly outpaces the S&P 500’s 45% increase over the same three-year period. However, this growth hasn’t been linear. CMG’s annual returns were 26% in 2021, -21% in 2022, and a strong 65% in 2023. Notably, Chipotle underperformed the S&P 500 in both 2021 and 2022, years where the broader market also experienced volatility and downturns. This highlights the challenge of consistently outperforming market benchmarks, even for leading stocks in the consumer discretionary sector and tech giants alike.
Chipotle’s resilience and recent outperformance are underscored by its first-quarter earnings, which surpassed analyst expectations for both revenue and profit. Average restaurant sales grew by 7% year-over-year in Q1, reaching $3.1 million, even with the addition of 47 new locations. Overall revenue climbed 14% year-over-year to $2.7 billion, driven by a 7% increase in comparable restaurant sales. Earnings per share saw an impressive 27% jump to $13.37 in Q1. Digital sales remain a significant driver, accounting for approximately 37% of food and beverage revenue in Q1, demonstrating the sustained popularity of online ordering even with the resurgence of in-person dining. The higher margins associated with digital orders contribute positively to Chipotle’s profitability. Furthermore, Chipotle’s rewards program continues to expand, boasting 40 million members as of Q1 2024, fostering customer loyalty and repeat business.
Looking ahead to the remainder of 2024, Chipotle anticipates mid-to-high single-digit growth in comparable restaurant sales, assuming current positive trends persist. The company plans to open between 285 and 315 new restaurants in 2024, with over 80% featuring Chipotlanes (drive-thrus), further enhancing accessibility and convenience for customers. For investors considering the restaurant sector, comparing NYSE:CMG to its peers is essential for informed decision-making. Resources like Trefis provide valuable peer comparisons to analyze Chipotle’s relative performance and valuation metrics against companies like McDonald’s and others in the fast-casual and broader restaurant industry. These comparisons offer critical context for understanding Chipotle’s market position and investment potential after its recent stock split.
