Chipotle Mexican Grill earns the IBD Stock of the Day title for Monday, as CMG shares ascend through a buy range as investors prepare for a 50-for-1 stock split to take effect on June 26. Chipotle stock sits on a year-to-date gain of better than 46%.
The fresh-food chain born in Denver in 1993 helped define the fast-casual dining category. Chipotle stock has rallied nearly 89% from an October low. Despite that gain, on June 13 Goldman Sachs indicated it still has room to run. Goldman initiated coverage with a buy rating and a "selectively constructive" outlook. Goldman placed its price target at 3,730 — about 12% above where Chipotle stock traded on Monday.
Upcoming Chipotle Stock Split
Earlier this month, shareholders greenlit a 50-for-1 stock split. The board of directors originally announced the plan on March 19. CMG holders as of June 18 will receive 49 additional shares on June 25. Chipotle stock will begin trading on a post-split basis on June 26.
It will be Chipotle's first stock split in its 30-year history and one of the biggest splits in the history of the New York Stock Exchange. The NYSE's last 50-for-1 stock split was Berkshire Hathaway's all the way back in 2010, MarketWatch reported. Previously, Nasdaq-listed Amazon.com (AMZN) completed a 20-for-1 split on June 6, 2022.
Stock splits spread the market value of a company across a greater number of shares, which results in a lower price point for the stock. The total market capitalization of the company and the stock's chart pattern remain unchanged after a stock split, but liquidity increases due to the issuance of more shares. A lower share price does make it easier to trade options.
Meanwhile, Chipotle will release second-quarter results on July 24, about a month after the split.
FactSet analysts expect Q2 earnings growth to slow slightly after accelerating the last two quarters, with a 24% increase to $15.63 per share. The sales target calls for a 16% jump, to $2.93 billion.
Chipotle Stock Action
Chipotle stock has not built a proper base since a breakout in November. It rebounded from 10-week support in January and in April.
Its current move is a bit of a hat trick. Shares rebounded from 10-week support. The chart also shows a three weeks tight pattern with a 3,242.66 buy point. Shares remain in a buy range on that pattern through 3,404.93.
In addition, investors could plot a buy point at the May 10 high of 3,260. That would put shares in a buy range through 3,423.
Chipotle is currently about 8% above its 50-day line, on a daily MarketSurge chart. It is 5.6% above its 10-week line on a weekly chart. This year, the stock has been extended as much as 12.9% above its 10-week, in January, and 10.7% in March.
CMG stock rose 2.9%, to 3,365.46 on Monday.
