CMG - Chipotle Just Did a Stock Split. History Says This Is What Might Happen Next.
2024-07-11 04:45:00 ET
A stock split doesn't fundamentally change anything about a business. Its financials remain the same, the stock's earnings multiples are the same, and it's just as good a buy as it was before the split. But that doesn't mean stock splits don't have an effect on a stock's performance. They are, after all, a positive sign that a business is doing well and that the share price is high enough that deploying a split is a justifiable move for management.
Chipotle Mexican Grill (NYSE: CMG) has been a phenomenal growth stock over the years. With many stocks splitting their shares in recent years, questions were arising about when Chipotle might finally follow suit. Now that it has, the stock is trading at a much more modest share price of around $60. But with stock splits attracting a lot of attention, could Chipotle's stock be due to rise a whole lot higher?
Many growth stocks have been doing well in recent years, and that has led to companies enacting stock splits. Lowering the share price makes a stock more accessible to a wider pool of investors, which can trigger more buying. Even if someone can own fractional shares, there can still be the connotation that because a stock's price is high, it's expensive. Although that's a flawed way of looking at a stock (investors should focus on multiples rather than just the raw stock price), the gains that some stocks have accumulated after deploying splits do appear to corroborate the notion that stock splits can have a positive effect on price.
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Chipotle Just Did a Stock Split. History Says This Is What Might Happen Next.