Should You Buy Chipotle (CMG) Ahead of the 50-for-1 Stock Split? 3 Things to Consider

The 50-for-1 stock split of Chipotle Mexican Grill (CMG) is scheduled to go live tomorrow (Tuesday, 6/25) after the market closes. As one of the largest stock splits in the history of the NYSE, all eyes are on the stock as the clock ticks down.

Those who are new to the concept of stock splits may wonder what this means for investors – financially speaking, nothing will change. Shareholders will maintain the same capital position but with far more shares. Here’s what it will look like based on today’s stock price:

• Today’s stock price: $3,184.00
• Tomorrow after the closing bell: $63.68

However, if an investor owns a single share, their position will still be $3,184.00. So why bother? CFO Jack Hartung says the goal was to make the stock more accessible to retail investors and to the company’s own employees. 

While it’s always possible to purchase fractional shares, a massive price tag can scare away those executing smaller trades. In this sense, stock splits of this nature have the potential to drive higher trading activity too – pushing the stock higher as a result.

All of this comes on the heels of an impressive first half of the year for CMG, up nearly 40% so far in 2024. Since announcing the stock split back in March, shares have climbed 23%.

This performance was also driven by impressive financial performance as the Mexican fast-food chain’s competitors struggled. Chipotle’s revenue is up 14% year-over-year while net income is up 23% in that same span.

When the initial approval of this stock split came through, we analyzed this stock and found 3 reasons to buy. At the time, CMG was just $2,900 per share. It climbed to $3,200 over the past 3 months.

So, is now still a good time to buy CMG? We’ve reassessed this opportunity through the VectorVest stock software and see 3 things you need to consider before making your next move.

CMG Has Fair Upside Potential and Timing With Very Good Safety

VectorVest is a proprietary stock rating system designed to save you time and stress while empowering you to win more trades. It does this by taking complex technical and financial data and transforming it into clear, actionable insights.

It’s all based on 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00 with 1.00 being the average, making interpretation quick and easy.

It gets even better, though. You’re given a clear buy, sell, or hold recommendation based on the overall VST rating for any given stock at any given time. Here’s what we found for CMG:

• Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. This offers much better insight than the typical comparison of price to value alone. CMG has a fair RV rating of 1.08.
• Very Good Safety: The RS rating is a risk indicator derived from a deep analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. CMG has a very good RS rating of 1.28.
• Fair Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. The RT rating of 1.04 is just fair for CMG right now.

The overall VST rating of 1.14 is good for CMG, but not quite enough to earn the stock a buy at this time. It’s currently rated a HOLD. 

However, we encourage you to dig deeper with a free stock analysis today and learn more about this opportunity, transforming your trading strategy for the better with VectorVest!

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VectorVest advocates buying safe, undervalued stocks, rising in price. CMG is set to conduct a 50-for-1 stock split Tuesday after the market closes after surging 40% YTD to a record high of $3,200 per share. The stock itself has fair upside potential and timing with very good safety.

Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action!