Amazon Announces 20-for-1 Stock Split: Could Chipotle Be Next?

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E-commerce giant Amazon (NASDAQ: AMZN) recently announced it would be doing a 20-for-1 stock split. Amazon’s share price has risen over the years and surpassed $3,000 per share. The hefty price tag could cause some investors to hesitate when considering a purchase. Of course, many brokers offer customers the ability to buy fractional shares, but everyday retail investors still sometimes get dissuaded from buying stocks that are expensive nominally.

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That said, Chipotle’s (NYSE: CMG) shares are in the four-figure territory, and that has some market participants asking if Chipotle could be next to do a stock split. Let’s first get into Amazon’s stock split and then ascertain the likelihood of a Chipotle stock split.

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Image source: Getty Images.

Amazon’s 20-for-1 stock split

Interestingly, Amazon’s stock split will not be instant. Shareholders will need to approve the initiative through a vote. If affirmed, shares will start trading at the split-adjusted price on June 6.

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Note that when a company announces a stock split, it does not change the shareholders’ ownership. Instead, it slices your ownership into more thinly cut pieces. For instance, if a company has 100 total shares outstanding and you own 50 of those shares, a 20-for-1 stock split will still leave your ownership at 50%. On a split-adjusted basis, you will have 1,000 shares out of the new total of 2,000.

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Regardless of the negligent impact on proportional ownership, a stock split announcement is typically bullish on the stock price, and Amazon was no exception. Since making the announcement, Amazon’s stock has been up some 10%.

Chipotle’s stock is getting pricey

As of the close of trading on March 18, Chipotle’s share 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% in the last three years.

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The company adapted well during the pandemic, and in 2021, sales increased by 26.1%. Fortunately for shareholders, many of the decisions that management made could pay off for several years; for instance, customizing new restaurants with a Chipotlane, a custom order lane exclusively for digital orders.

What’s more, orders made online for pick up in-store are the most profitable. It removes the need for a staff member to process a payment. Any moves to reduce staffing needs will pay off, considering the widespread labor shortages emerging from the pandemic.

“2021 was an outstanding year for Chipotle, highlighting the strength and resiliency of our brand. Together, we accomplished many incredible things as our passionate employees remained dedicated to delivering excellent guest experiences, aligned with our purpose and values,” said Brian Niccol, chairman and chief executive officer of Chipotle.

Indeed, the year went so well that the company upgraded its long-run target for total restaurants in North America to 7,000 from 6,000. If it keeps operating as well as it’s been doing, the share 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 member of The Motley Fool’s board of directors. 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.



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