News and analysis

Chipotle Mexican Grill Inc (CMG) seeks to attract more small investors by approving a 50-for-1 stock split. The burrito chain never did it before in its history, since it launched its IPO (initial public offering) in January 2006 at only $22 per share. Now, Chipotle Mexican Grill's stock price touched $3,000 per share on March 20, after nearly doubling its market value for the last 12 months. A spectacular success among other restaurant segment companies and large income for its faithful shareholders for many years, yet few private traders can handle such an expensive part for only one company in their portfolios, and so many just prefer to skip the CMG option. Who has extra $3,000 for Mexican food on a trading account? This is why the amount of those investors is much less compared to the number of rice bowl eaters and lovers of tacos. Chipotle's board is ready to fix the problem. This split would happen at the moment when the stock is "experiencing an all-time high driven by record revenues, profits, and growth," Jack Hartung, its CFO argued. He hopes the move would make CMG stock accessible to the chain's own employees and "a broader range of investors". Each CMG investor as of June 18, 2024 would get 49 additional shares for each share held. And the split shares for new attracted investors will be done after the Wall St closes on June 25, 2024. So, everybody would be able to purchase some stake in Chipotle Mexican Grill, starting from $60 or maybe a little more, depending on the post-split quotes of the company at that moment.

The Chipotle Mexican Grill stock was trading around $2,800 before the opening bell on March 19, when the split announcement came immediately sending the price to a new range between $2,900 and $3,000. CMG shares may continue to rally, especially after the split would be accomplished, to hit fresh record levels propelled by the current bullish sentiment. Such expectations are based on strong earnings due to a solid demand in more than 3,400 locations only across the United States. Chipotle Mexican Grill forecasted a 34.4% YoY growth for the current fiscal year and may become a top pick for growth investors at a low cost price soon. In early February 2024, CMG beat consensus numbers once again in both top and bottom lines, while projecting its full year comparable sales growth in the mid-single digit range.

A brief but eventful history. In 1993, the first Chipotle Mexican Grill opened in Denver, Colorado. In 1998, the first restaurant outside of Colorado started in Kansas. In the same year, McDonald's became a minority investor in the company to become Chipotle's largest investor by 2001. The business expanded to over 500 food points in 2005. In October 2006, McDonald's fully divested from Chipotle, as a part of a larger initiative to divest its non-core business restaurants. Ironically, some twenty years after this, Chipotle Mexican Grill shares may become a part of almost every investment portfolio.

Encouraging verbal signs and interest rate path projections after the Federal Reserve meeting last night clearly provided greater support to the broad S&P 500 indicator than to its leading core consisting of the AI-related businesses. The S&P 500 just ended the regular session on March 20 by nearly 0.9% higher to close above 5,200 points for the first time ever and then added another 0.5% in the pre-market trading today, while most AI-leaders, including NVidia and AMD, stood in the vicinity of their previous heights. At the same time, even some stocks that were lagging behind in recent months like Tesla (+2.5%) or banking stocks cheered up more visibly. The Bank of America added 2% in one day, as an example. Several consumer discretionary stocks rose too. A very much understandable effect, as the AI core, or tech stocks at the bigger picture, represented a major group, which successfully climbed upstairs even without any doping help from central bankers. Meanwhile, most stocks need stronger pillars like lower borrowing costs and soft landing hopes to grow further. And so, the market has been granted that wish.

Surely, the Fed left its fund rates steady for the fifth time in a row, yet it mentioned three "planned" rate cuts before the end of 2024. The chair Powell said before that March was "too soon" to have "enough confidence" from incoming economic data to cut rates, but now most investing houses are betting for June. The Fed also saw more rate cuts to drop to 3.9% in 2025 and 3.1% in 2026. For me, they are using a kind of gaslighting tactic, as initially they pushed the market to suppose up to six rate cut moves this year. In fact, the Fed did zero moves, while inflation is trending up again, and so the Wall Street is now happy with only a suggestion of three rate cuts soon. This is not dovish yet is perceived as being dovish. That was a neat trick with our minds yet it worked well to make almost everybody keep bullish positions. This happens exactly when most households and business owners continue to suffer from too expensive credit money, yet this would not prevent mega caps and now broader markets to enjoy new peaks. Well, all of us will work with what we all have, still expecting the S&P 500 at 5,500 or so in few months. And I will buy and hold when others are buying and holding, why not?

Ethereum (ETH) faced a weekly decline of 2.8%, trading at $3535. However, the altcoin experienced a significant drop of 16.0% to $3054 earlier in the week, nearing crucial support levels at $3000. The decline coincided with broader market trends, as Bitcoin (BTC) also saw a 10.8% decrease to $60,817 on Wednesday.

The major contributing factor to the downward pressure on Ethereum was the news of the U.S. Securities and Exchange Commission (SEC) delaying the approval of a spot ETH-ETF, which was anticipated on May 23. This announcement added to the negative sentiment in the cryptocurrency market.

However, Ethereum saw a notable recovery after the Federal Reserve hinted at potential interest rate cuts in June, despite ongoing concerns about inflation. The Fed's assurance regarding monetary policy provided a sense of relief to investors, leading to a market-wide rebound.

With the Fed's announcement, Ethereum has an opportunity to regain momentum and potentially reach $4000 per coin if it can surpass the resistance level at $3500.

Intel Corp (INTC) stocks have experienced a significant decline of 16.6% to $42.0 per share since the beginning of 2024, presenting a challenging situation for its investors despite the prevailing AI mania that is expected to drive demand for computer chips. However, this downturn may present an opportunity for a potential recovery, especially as the stock has reached a support level within its uptrend.

Furthermore, rumors circulating about Intel potentially securing an $8.5 billion contract from the U.S. government to modernize its chip production facilities could serve as a positive catalyst for the company's stock.

Considering these factors, purchasing the stock within the $40.0-42.0 range with a target price of $50.0-52.0 per share appears to be a strategic move. Setting a stop-loss at $31.0 can help mitigate potential losses in case the stock does not perform as expected.