Chipotle (CMG) investors will notice a difference in their portfolios today.
The burrito giant conducted a 50-for-1 stock split, the company’s first split ever and one of the largest in the history of the New York Stock Exchange.
Chipotle CFO Jack Hartung told investors he believes this will make shares more “accessible to our employees as well as a broader range of investors” on a call following the company’s first quarter results.
Shareholders who owned the stock as of the market close on June 18 received 49 additional shares for each one held. When the market opened Wednesday, shares began trading on a post-split basis, meaning one share worth $3,283.04 as of Tuesday’s close is now trading as 50 shares worth around $65 per share at the market open.
Shares were up slightly in midday trading.
Pre-split, Chipotle stock was the third-highest priced in the S&P 500 (^GSPC), after NVR, Inc. (NVR) and Booking Holdings (BKNG). Its post-split stock price is still higher than when the company went public in 2006 at $22 per share.
Bernstein analyst Danilo Gargiulo told Yahoo Finance that Chipotle could benefit from this split.
On one hand, this new entry point allows “more access to retail investors” who may have shied away from the high price prior to the split, Gargiulo said. But on the other hand, “the stock could be exposed a little bit more to some level of volatility,” he warned.
“I don’t think it’s ever going to be a meme stock, like GameStop (GME) or others in the past, but I think it does expose a little bit to more fluctuations,” Gargiulo added.
In a note to clients following the split, TD Cowen analyst Andrew Charles said the firm believes Chipotle is “well positioned to deliver mid-single digit same-store sales annually over the medium term,” driven by its omnichannel approach, Chipotlane drive-through innovation, and consumers’ interest in ingredient transparency. Charles now has a price target of $72 on the stock.
As of Tuesday’s market close, shares of Chipotle were up 43% year to date on the back of a sizzling stretch of sales, compared to a nearly 15% gain from the S&P 500. Shares of rival fast food chains McDonald’s (MCD) and Restaurant Brands (QSR) are down 13% and 11%, respectively, as each battle traffic challenges.
Yum! Brands (YUM) — owner of Taco Bell, KFC, and Pizza Hut — is up slightly on the year.
Some Chipotle employees will reap the benefits of the split.
Approximately 4,000 Chipotle employees, including restaurant general managers and crew members with more than 20 years of service, will receive a special one-time equity grant to commemorate the stock split, a Chipotle spokesperson told Yahoo Finance.
The grant will vest over three years. Additionally, US employees who have been with the company for one year can enroll in the Employee Stock Purchase Plan (ESPP), which allows them to purchase shares at a discount. They also can elect to use between 1% and 15% of their compensation to help buy the stock.
And Chipotle is not the only company conducting a stock split this year.
As Yahoo Finance’s Seana Smith reported following Nvidia’s (NVDA) 10-for-1 stock split earlier this month, stock splits are typically bullish for companies that conduct them, with average returns one year later of 25% versus about 12% for the broader market, according to analysis from Bank of America.
Walmart (WMT) also recently conducted a 3-for-1 stock split. Since the stock split took effect on Monday, Feb. 26, shares of the world’s largest retailer are up nearly 13%.
Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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