Amazon Announces 20-to-1 Stock Split: Could Chipotle Be Next?
E– trade giant Amazon (NASDAQ: AMZN) recently announced that it would be doing a 20-to-1 stock split. Amazon’s stock price has risen over the years and topped $3,000 per share. The high price could cause some investors to hesitate when considering a purchase. Of course, many brokers offer clients the option of buying fractional shares, but ordinary retail investors are still sometimes deterred from buying expensive stocks.
That said, Chipotles (NYSE: CMG) the shares are in the four-digit territory, leading some market participants to question whether Chipotle could be next to do a stock split. Let’s get into the Amazon stock split first, then check the probability of a Chipotle stock split.
Amazon 20-to-1 stock split
Interestingly, Amazon’s stock split won’t be instantaneous. Shareholders will have to approve the initiative by a vote. If confirmed, the shares will begin trading at the split-adjusted price on June 6.
Note that when a company announces a stock split, it does not change shareholder ownership. Instead, it cuts your property into more finely cut pieces. For example, if a company has a total of 100 shares outstanding and you own 50 of those shares, a 20-to-1 stock split will still leave your ownership at 50%. On a split basis, you own 1,000 shares of the new total of 2,000.
Regardless of the negligent impact on proportional ownership, a stock split announcement is usually bullish on the stock price, and Amazon was no exception. Since the announcement, Amazon shares have risen about 10%.
Chipotle stock is getting expensive
As of the close of trading on March 18, Chipotle’s stock price was $1,587. The high price could discourage some retail investors from buying a piece of the fast-casual restaurant chain. Chipotle’s stock has been on fire, rising 148% over the past three years.
The company has adapted well during the pandemic, and in 2021, sales increased by 26.1%. Fortunately for shareholders, many of the decisions made by management could bear fruit for several years; for example, personalizing new restaurants with a Chipotlane, a personalized ordering lane exclusively for digital orders.
Additionally, orders placed online for in-store pickup are the most profitable. It removes the need for a staff member to process a payment. Any move to reduce staffing needs will pay off, given the widespread labor shortages resulting from the pandemic.
“2021 has been a standout year for Chipotle, showcasing the strength and resilience of our brand. Together, we’ve accomplished many incredible things as our passionate employees have remained committed to delivering great guest experiences aligned with our purpose and our values,” said Brian NicolChairman and CEO of Chipotle.
Indeed, the year went so well that the company raised its long-term goal for the total number of restaurants in North America from 6,000 to 7,000. If it continues to perform as well that it does, the stock price could rise further, increasing the chances of a stock split for Chipotle.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Parkev Tatevosian owns Amazon and Chipotle Mexican Grill. The Motley Fool owns and recommends Amazon and Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.