Why Chipotle Stock Tanked Thursday Just After Its Stock Split

Eric Volkman, The Motley Fool Thu, Jun 27, 2024, 5:47 PM EDT

Chipotle Mexican Grill (NYSE: CMG) has been one tasty quesadilla of a stock on the exchange over the years. The fast-casual restaurant chain operator didn’t have a good session on the market Thursday, however. Its shares fell more than 5% in value, which wasn’t unusual given what happened the previous day.

Stock-split indigestion

Chipotle investors started Wednesday with a much higher number of shares than they held previously. Of course, this was due to the 50-for-1 stock split that kicked in that morning.

That ratio is pretty high — most stock splits are more in the 10-for-1 range or so — but it feels like a good move given how pricey the restaurant operator became on a per-share basis. A cheaper stock is a more attractive one, and it’s likely many investors piled into Chipotle recently in the hopes that its popularity would surge post-split.

Often with price-pushing events, when the event itself is over, many folks book the profits they made on the run-up. This quick, heavy selling tends to push a stock’s price down. In the absence of any negative fundamental news for Chipotle, profit-taking is likely the main culprit for the Wednesday swoon.

More of the same

It’s important to note here that, as with any stock split, the value of Chipotle stock did not change at all. Investors still held the same amount of stock in dollar terms as they had previously; the only changes were the number of shares and the price.

Given all that, no one should bail on Chipotle simply because it’s on the other side of a big financial engineering effort. Believers in the company’s business model might even pounce on the price weakness. After all, given Chipotle’s enduing popularity, it probably won’t last.

Should you invest $1,000 in Chipotle Mexican Grill right now?

Before you buy stock in Chipotle Mexican Grill, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Chipotle Mexican Grill wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $774,526!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of June 24, 2024

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Why Chipotle Stock Tanked Thursday Just After Its Stock Split was originally published by The Motley FoolView Comments(11)

About The Wall Street Analyzer 1517 Articles
The Wall Street Analyzer's staff of writers, analysts, publishers, producers, market researchers, and PR professionals aim to provide investors with the tools they need to make informed decisions on buying stock. Our staff is a mix of financial professionals and media savvy individuals whose experiences bring the best talent from both ends of the spectrum.

Be the first to comment

Leave a Reply