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Chipotle shareholders approve of historic 50-1 stock split. Here’s what happens next.

Chipotle (NYSE:CMG) is one step closer to the finish line of the historic stock split. At the annual shareholders meeting on June 6, 2024, shareholders approved the measure, paving the way for the 50-for-1 stock split to take place later this month.

There are a few important dates that shareholders should remember. Let’s take a look at the specifics so that investors are prepared for the upcoming stock split.

A partially eaten Chipotle burrito with fries and guacamole.

Image source: Chipotle.

Mark your calendar

Chipotle’s press release noted several important dates that shareholders should mark their calendars.

The first significant date was the annual meeting that took place on June 6, when shareholders voted on the stock split, which the company said was “one of the largest stock splits in the history of the New York Stock Exchange.” The company said that “shareholders have approved an increase in the number of authorized shares of its common stock,” marking a significant milestone in the process.

The second important date noted by Chipotle management is the record date. Every shareholder of record on Tuesday, June 25 will be entitled to participate in the upcoming stock split and will receive an additional 49 shares for each share he/she currently owns.

The third reference date is the payment date. After closing on Tuesday, June 25, 2024, each shareholder will receive the newly minted shares. This officially takes place after the market closes, and the additional shares are automatically deposited into shareholders’ brokerage accounts.

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If you are already a Chipotle shareholder, you do not need to do anything to receive the additional shares. However, it’s important to remember that the process can vary from broker to broker, so some investors may notice a delay of hours or even days before the additional shares appear in your account.

Finally, Wednesday, June 26 is the date Chipotle will begin trading on a split-adjusted basis. Investors can expect the shares to trade at about one-fiftieth of their pre-split price. For example, for every share they recently own worth $3,250, investors will own 50 shares worth about $65 each after the split.

But is the stock a buy?

There’s little doubt that Chipotle has become synonymous with fresh ingredients, and the company is a leader in fast-casual dining. This has caused the share to rise by as much as 43% this year. Looking further back, early investors were treated to mind-boggling returns, with the stock up over 14,742% (at time of writing) since its initial public offering in 2006. With the stock split looming and share trading near record highs, investors are faced with the essential investment question : is the stock a buy or has the opportunity passed?

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Despite Chipotle’s impressive rise, there are many more opportunities ahead for the burrito purveyor, as evidenced by its recent financial report. In the first quarter, Chipotle generated revenue of $2.7 billion, up 14% year over year, resulting in diluted earnings per share (EPS) of $13.01, up 24%. It’s always telling when earnings per share exceed revenue growth, because that’s a sign that a company’s size and influence are such that more profit goes to the bottom line.

Additionally, Chipotle’s comparable restaurant (or composer) sales rose 7%, driven by transactions that rose 5%, while the average check rose 2%. The company also continues to squeeze more revenue from each location, as average restaurant sales rose 2%.

Chipotle had 3,479 restaurants at the end of the first quarter, but management ultimately targets 7,000 locations in North America. Although international growth has taken a back seat to domestic growth, there are still plenty of opportunities abroad.

Despite stocks hitting record highs this week, some on Wall Street believe much more is yet to come. Analysts at Goldman Sachs (NYSE:GS) called Chipotle a “top idea” and assigned a buy rating and a $3,730 price target. This represents potential gains for investors of 18% over the next year, compared to the stock’s closing price on Wednesday. The analyst cited Chipotle’s “ability to scale the business in a highly profitable manner without losing control of its core businesses, including the quality of the food and customer experience.”

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Taken together, the company’s robust results, enormous opportunity and Wall Street’s increasingly optimistic view illustrate that Chipotle has a long growth trajectory ahead of it.

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Danny Vena holds positions in Chipotle Mexican Grill. The Motley Fool holds positions in and recommends Chipotle Mexican Grill and Goldman Sachs Group. The Motley Fool has a disclosure policy.

Chipotle shareholders approve of historic 50-1 stock split. Here’s what happens next. was originally published by The Motley Fool

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