Chipotle Mexican Grill (NYSE:CMG) has been a longtime investor favorite, but this year 50-to-1 stock splitThis is one of the largest stock splits in history, and makes a lot of sense considering the stock price was in four digits before the split.
The split went through in June, and Chipotle’s stock has since fallen slightly — it’s trading at $57.50 per share as of this writing — but is still up 26% year to date. What else can investors expect after the split?
Increased sales
Chipotle reports double-digit sales growth every quarter, typically driven by new stores and Existing store sales (comps)Revenues rose 14% year over year in the first quarter of 2024, and same-store sales increased 7%, and management expects similar results for the full year.
The company has standard tactics it typically uses to boost revenue at different times, such as menu innovations and marketing campaigns for specific foods, and it also regularly offers limited-time options and menu specials to generate interest and engagement.
Increased profits
Expenses as a percentage of revenue in the first quarter were down year over year, primarily due to price increases. The company has a good handle on what its customers like and are willing to pay for. Management was able to successfully raise prices to counter the impact of rising costs without denting demand.
Wall Street analysts expect full-year earnings per share (EPS) of $1.12, up from $0.90 in 2023 after adjusting for stock splits.
Other stores
Management believes it can double its current store count (about 3,500) in North America alone, and has plenty of room to expand internationally. The company plans to open 47 stores in the first quarter of 2024, 43 of which will have Chipotlanes (drive-thrus).
This is important because Chipotlan solves a pain point for consumers: As the digital world becomes more prevalent in our lives, the ability to order and pick up at the drive-thru leads to increased trust, engagement, and ultimately, sales.
The chain plans to open between 285 and 315 new stores in 2024 overall, up from the 271 it opened last year, with 80% of those stores expected to be Chipotlan.
Management has said it will focus on suburban and international locations. The company recently announced its first franchise agreements for its Middle East locations, opening a restaurant in Kuwait in April and plans to open one in Dubai later this year, totaling four regional restaurants by the end of 2024.
These are experiments that won’t necessarily significantly increase total revenue, but they could lead to further international expansion. While keeping all of the restaurants company-owned has its advantages, such as greater control over the food, expanding the franchise business has its advantages, such as wider profit margins.
Happy investor
Chipotle’s performance and potential have not changed since the stock split, but some of its rally this year was due to hype around the stock split. The stock has since fallen slightly, leaving its valuation close to recent levels.
That means it’s in a good position to start climbing again. There are no guarantees, but there’s no reason to think anything will change later this year.
Chipotle has a great business and a good future. Investors should focus on the long term, and the company has plenty of room to grow for many years to come.
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Jennifer Cybill The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Chipotle Mexican Grill. The Motley Fool recommends Chipotle Mexican Grill. Disclosure Policy.
Chipotle’s stock split is now complete. Here’s what to expect for the rest of 2024. Originally published on The Motley Fool
