Many notable stock splits have occurred in recent years, with companies aiming to increase liquidity within shares and erase barriers to entry for potential investors. Now Nvidia and Chipotle Mexican Grill now have joined the stock-split fray.
Stock splits give lower share prices, making stock purchases more affordable for a greater number of investors (although it’s worth noting that the rise of fractional share investing has alleviated this issue for some). Of course, important to note stock splits do not affect the company’s valuation or financial health.
What do the recently announced stock splits for Nvidia NVDA and Chipotle Mexican Grill CMG mean? Let’s take a closer look at how the companies currently stack up and an example of a recent split among a retail heavyweight.
Nvidia Announces 10-for-1 Stock Split
Nvidia yet again blew away quarterly expectations in its quarterly print, with unrelenting demand for AI chips driving robust performance. Earnings and revenue grew 460% and 260%, respectively, whereas Data Center sales melted 430% higher from the same period last year.
Shares soared following the release, with the company enjoying post-earnings positivity all throughout 2024. In addition to a 10-for-1 split, the company also announced a 150% boost to its quarterly dividend payout, reflecting a shareholder-friendly nature.
Image Source: Zacks Investment Research
Nvidia’s earnings outlook only continues to get brighter, with the stock remaining a highly-coveted Zacks Rank #1 (Strong Buy). Shares represent a prime opportunity for any investor seeking AI exposure, with demand expected to remain strong.
Below is a chart illustrating the bullish revisions trend for its current fiscal year. Shares will begin trading on a split-adjusted basis on June 10.
Image Source: Zacks Investment Research
Chipotle Mexican Grill operates quick-casual and fresh Mexican restaurant chains. It’s the first split in the company’s history, aiming to make shares more accessible to employees as well as a broader range of investors. Shares are expected to begin trading on a post-split basis on June 26.
The company’s sales growth has been spectacular, with CMG posting double-digit percentage revenue growth rates in each of its last 15 quarterly releases.
Image Source: Zacks Investment Research
Since the split announcement, shares have gained nearly 13% compared to the S&P 500’s 3% gain. Impressively, CMG shares have delivered a 36% annualized return over the last five years. As shown by the green arrow, performance has been aided by quarterly releases.
Image Source: Zacks Investment Research
How did Walmart Stock Split Perform?
Retail giant Walmart WMT recently underwent a 3-for-1 split, with shares trading on a split-adjusted basis starting on February 26. Like Nvidia, analysts have become bullish on the company’s outlook, with the stock sporting a favorable Zacks Rank #2 (Buy).
As shown in the below chart, shares gained 8% in value during the period in which the split was announced (Jan. 30) to the actual split date (Feb. 26). It’s worth noting that quarterly results also partly boosted share performance, similar to CMG.
Image Source: Zacks Investment Research
Bottom Line
While stock splits don’t affect a company’s fundamentals, they can positively influence investor perception, leading to increased demand and higher liquidity within shares.
And with the recent announcements we’ve received from Chipotle Mexican Grill CMG and Nvidia NVDA, splits have jumped back into the headlines.
Still, the announcement of a split doesn’t reflect an immediate buy signal, as investors focused on the near term should instead focus on earnings estimate revisions.
In addition, it’s worth noting positive price action generally leads into the split, with Walmart WMT shares not seeing a boost on its actual split date.
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Walmart Inc. (WMT) : Free Stock Analysis Report
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
