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Time to Buy Chipotle (CMG) or IBM's (IBM) Stock for Higher Highs?
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Two large-cap stocks that may be catching investors' attention are Chipotle Mexican Grill (CMG - Free Report) and IBM (IBM - Free Report) as both have been on the cusp of reaching higher highs.
Driven by a remarkable turnaround in its sales growth IBM shares hit 52-week highs of $199.18 last Tuesday. Meanwhile, Chipotle’s continued expansion has been magnified by the company planning a 50 to 1 stock split and hit peaks of over $3,000 a share today.
Having a dominant footprint in their respective industries, IBM has a market capitalization of $177.65 billion with Chipotle at $76.77 billion. That said, let’s see if it’s time to buy stock in either of these corporate titans as they continue to take market share in the computer-integrated systems and retail restaurant markets respectively.
Image Source: Zacks Investment Research
IBM’s Renovation
Formally known for its computer hardware products IBM’s transformation to software applications including hybrid cloud and AI strategies has put an end to the tech giant's slowing sales growth. Furthermore, IBM’s annual revenue of $60.53 billion spiked 5% last year marking the largest percentage increase since 2011.
Image Source: Zacks Investment Research
IBM’s total sales are projected to rise 3% in fiscal 2024 and are expected to edge up another 4% next year to $66.59 billion. More importantly, is that annual earnings are expected to be up 4% in FY24 and forecasted to pop another 5% in FY25 to $10.58 per share. It’s also noteworthy that FY25 EPS projections would represent 33% growth over the last five years with IBM’s bottom line edging closer to pre-pandemic levels of $12.81 per share in 2019.
Image Source: Zacks Investment Research
Chipotle’s Stock Split
Unprecedented growth has become Chipotle’s trademark but a stock split has long been awaited to make its shares more affordable to retail investors. On Tuesday, Chipotle’s board delivered and announced what will be one of the largest stock splits in New York Stock Exchange history and is expected to take effect on Wednesday, June 26.
Considering its most recent closing price the 50-1 split would put CMG shares at around $58. With Chipotle’s annual earnings projected to jump 18% this year to $53.11 per share this would be adjusted to roughly $1.06 a share post-split. Notably, Chipotle's EPS is currently forecasted to leap another 21% next year to $64.62 per share or $1.29 a share post-split.
Image Source: Zacks Investment Research
Recent Performance & Valuations
Year to date Chipotle’s stock has soared +27% while IBM shares have climbed +19% with both outperforming the S&P 500’s +8% and the Nasdaq’s +9%. Over the last year, Chipotle’s stock has now risen +78% with IBM up +54% to easily top the broader indexes.
Image Source: Zacks Investment Research
IBM still trades at a reasonable 19.2X forward earnings multiple which is below the S&P 500’s 21.7X but slightly above its Zacks Computer-Integrtred Systems industry average of 18.2X.
Image Source: Zacks Investment Research
As for Chipotle, it has historically been able to command a premium due to its high growth margins and niche as a premium fast food leader. CMG currently trades at 52.6X forward earnings which is well below its decade-long high of 231.1X and closer to the median of 49.7X. However, it is important to remember that following its stock split CMG’s P/E will likely be higher from its EPS being diluted.
Image Source: Zacks Investment Research
Bottom Line
At the moment, Chipotle and IBM’s stock both land a Zacks Rank #3 (Hold). To that point, longer-term investors may continue to be rewarded but there could be better buying opportunities ahead considering their very strong year to date rallies.
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Time to Buy Chipotle (CMG) or IBM's (IBM) Stock for Higher Highs?
Two large-cap stocks that may be catching investors' attention are Chipotle Mexican Grill (CMG - Free Report) and IBM (IBM - Free Report) as both have been on the cusp of reaching higher highs.
Driven by a remarkable turnaround in its sales growth IBM shares hit 52-week highs of $199.18 last Tuesday. Meanwhile, Chipotle’s continued expansion has been magnified by the company planning a 50 to 1 stock split and hit peaks of over $3,000 a share today.
Having a dominant footprint in their respective industries, IBM has a market capitalization of $177.65 billion with Chipotle at $76.77 billion. That said, let’s see if it’s time to buy stock in either of these corporate titans as they continue to take market share in the computer-integrated systems and retail restaurant markets respectively.
Image Source: Zacks Investment Research
IBM’s Renovation
Formally known for its computer hardware products IBM’s transformation to software applications including hybrid cloud and AI strategies has put an end to the tech giant's slowing sales growth. Furthermore, IBM’s annual revenue of $60.53 billion spiked 5% last year marking the largest percentage increase since 2011.
Image Source: Zacks Investment Research
IBM’s total sales are projected to rise 3% in fiscal 2024 and are expected to edge up another 4% next year to $66.59 billion. More importantly, is that annual earnings are expected to be up 4% in FY24 and forecasted to pop another 5% in FY25 to $10.58 per share. It’s also noteworthy that FY25 EPS projections would represent 33% growth over the last five years with IBM’s bottom line edging closer to pre-pandemic levels of $12.81 per share in 2019.
Image Source: Zacks Investment Research
Chipotle’s Stock Split
Unprecedented growth has become Chipotle’s trademark but a stock split has long been awaited to make its shares more affordable to retail investors. On Tuesday, Chipotle’s board delivered and announced what will be one of the largest stock splits in New York Stock Exchange history and is expected to take effect on Wednesday, June 26.
Considering its most recent closing price the 50-1 split would put CMG shares at around $58. With Chipotle’s annual earnings projected to jump 18% this year to $53.11 per share this would be adjusted to roughly $1.06 a share post-split. Notably, Chipotle's EPS is currently forecasted to leap another 21% next year to $64.62 per share or $1.29 a share post-split.
Image Source: Zacks Investment Research
Recent Performance & Valuations
Year to date Chipotle’s stock has soared +27% while IBM shares have climbed +19% with both outperforming the S&P 500’s +8% and the Nasdaq’s +9%. Over the last year, Chipotle’s stock has now risen +78% with IBM up +54% to easily top the broader indexes.
Image Source: Zacks Investment Research
IBM still trades at a reasonable 19.2X forward earnings multiple which is below the S&P 500’s 21.7X but slightly above its Zacks Computer-Integrtred Systems industry average of 18.2X.
Image Source: Zacks Investment Research
As for Chipotle, it has historically been able to command a premium due to its high growth margins and niche as a premium fast food leader. CMG currently trades at 52.6X forward earnings which is well below its decade-long high of 231.1X and closer to the median of 49.7X. However, it is important to remember that following its stock split CMG’s P/E will likely be higher from its EPS being diluted.
Image Source: Zacks Investment Research
Bottom Line
At the moment, Chipotle and IBM’s stock both land a Zacks Rank #3 (Hold). To that point, longer-term investors may continue to be rewarded but there could be better buying opportunities ahead considering their very strong year to date rallies.