Chipotle's stock zooms toward record after announcing 50-for-1 stock split. Some analysts think it can go even higher.

By Claudia Assis and Bill Peters

The last 50-for-1 stock split on the NYSE was Berkshire Hathaway's in 2010

Chipotle Mexican Grill Inc.'s stock rallied Wednesday, following news a day earlier that the fast-casual restaurant chain's board has approved a 50-for-1 stock split - its first-ever such move, and one intended to make the stock easier to buy as it continues to march higher.

Shares of Chipotle (CMG) were trading at around $2,900 and on track to close at a record high Wednesday. They were also poised for their biggest one-day percentage increase since April 26, 2023, when Chipotle's stock rose nearly 13%.

The stock is up for seven straight sessions, gaining around 13% over the period. Chipotle currently has a market value of $76.7 billion.

In announcing the move on Tuesday, Chipotle said the split would be "one of the biggest stock splits in New York Stock Exchange history." The last time the exchange saw a 50-for-1 stock split was in 2010, albeit from a far bigger company: Warren Buffett's Berkshire Hathaway (BRK.A) (BRK.B), which had a market capitalization of around $169 billion at the time.

Mastercard Inc. (MA) had a 10-for-1 stock split in 2014, and was worth around $100 billion in market cap at the time.

The stock split from Chipotle still needs to be approved by shareholders. But as shares ran higher on Wednesday, some analysts said there was room for bigger gains.

In a research note Wednesday, Raymond James analyst Brian Vaccaro cited gains in consumer foot traffic, more store openings and new automation equipment - including an ingredient-dispenser system that can make bowls and salads and robot that a robot called "Autocado" that helps with guacamole prep - in raising his price target on the stock to $3,200.

Vaccaro added that the return of the chain's Chicken al Pastor limited-time offering, which made up around a fifth of transactions when it first rolled out last year, would help same-store sales, or comps.

"While spreads can vary, third-party data suggest Chipotle's comps continue to strongly outperform segment trends and may have strengthened in recent weeks," he wrote. "We are optimistic that the recent relaunch (3/12) of Chicken al Pastor can drive continued strong comp outperformance."

William Blair analysts on Wednesday also said they believe sales trends at Chipotle remain "healthy." They said the company was "well-positioned" to put up margin expansion and "high-teens" earnings-per-share growth this year, with further gains next year.

On Tuesday, Chipotle Chief Financial Officer Jack Hartung said the stock split "will make our stock more accessible to employees as well as a broader range of investors." He added: "This split comes at a time when our stock is experiencing an all-time high driven by record revenues, profits and growth."

Shareholders need to approve an amendment to Chipotle's certificate of incorporation to increase the number of shares to accommodate the split. Chipotle said it plans to seek shareholder approval for that amendment at its annual meeting scheduled for June 6.

If the amendment is approved, shareholders of record as of June 18 will receive 49 additional shares for each share held, to be distributed after market close on June 25, the company said. The stock is expected to start trading in its post-split state at the market open on June 26.

Chipotle also announced a special one-time equity grant for all restaurant general managers, as well as crew members with more than 20 years of service, as a way to thank them, it said.

Shares of Chipotle have gained 78% in the past 12 months, far outpacing a 29.4% gain for the S&P 500 index SPX.

-Claudia Assis -Bill Peters

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03-20-24 1331ET

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