Chipotle stock is soaring and about to get a lot cheaper.

stock Chipotle Mexican Grill (NYSE:CMG) surged Thursday, up about 7%, helped by a strong first-quarter earnings report that beat expectations.

Additionally, the fast food chain’s stock price is set to get significantly cheaper as it prepares for a 50-to-1 stock split at the end of the second quarter. The first stock split in the company’s history will see each shareholder receive an additional 49 shares for every share they own. At the current stock price of about $3,100, one share would be worth about $62 after the split.

Of course, the actual price after the stock split is based on the current stock price as of June 18th, and Chipotle stock will begin trading at the new price on June 26th. More investors can access it.

Surpasses most of the Magnificent Seven

Chipotle has been one of the most consistent performers in the market over the past five to six years. Since 2018, there has been only one year that ended in a loss, with a 20% drop in 2022. Last year, the stock returned 65%, and this year it has already risen 39% since the beginning of the year.

Over the past five years, Chipotle has delivered an average annual return of 34%, better than Apple, Amazon, Microsoft, Alphabet, and Meta Platform.

The company continued to grow in the first quarter, with revenue increasing 14% year-over-year to $2.7 billion. Comparable restaurant sales rose 7%, and the chain added 47 new restaurants in the quarter, including drive-thru Chipotlane locations. The chain’s transaction volume increased 5.4% and average check size increased 1.6%.

Chipotle’s net income rose 23% to $359 million, or $13.01 per share, beating the consensus estimate of $11.68 per share.

The company was able to cut costs, as food, beverage and packaging costs were 28.8% of total sales, down about 40 basis points compared to the first quarter of 2023. Spreads benefited from increased menu prices, but also from inflation. Chipotle’s overall operating margin increased to 16.3% from 15.5% in the same quarter a year ago, while at the restaurant level it rose 190 basis points to 27.5%.

“We delivered another outstanding quarter, driven by improved throughput and successful marketing initiatives, including Braised Beef Barbacoa and Chicken Al Pastor,” Chairman and CEO Brian Niccol said in the earnings report. “With a focus on developing outstanding people, preparing delicious food, and fast throughput, the results we are seeing give us confidence that we can achieve our long-term goals of more than doubling our business in North America and expanding internationally.”

A major stock split is coming

Going forward, Chipotle expects to maintain similar levels of restaurant sales growth, targeting annual percentage growth rates in the mid-to-high single digit range. Additionally, there are expected to be 285 to 315 new restaurants by 2024, 80% of which will have a drive-thru Chipotle.

Chipotle’s financial health is good, with improving margins, growing cash flow, manageable debt, and a solid current ratio (1.65), which measures the company’s ability to repay short-term debt.

Analysts have become much more optimistic about Chipotle stock since its most recent earnings report. That’s because Chipotle stock received more than a dozen price target hikes on Thursday, with an average price target of $3,200. This represents an increase of about 2.5% from current prices, but keep in mind that the stock is already up 40% YTD.

Chipotle stock isn’t cheap by any means, either at a stock price of more than $3,100 or in value terms, trading at 66 times earnings. But with the 50-for-1 stock split pending shareholder approval on June 6, the entry price will probably be much cheaper, around $60 per share.

“This is the first stock split in Chipotle’s 30-year history, and we believe it will make our stock more accessible to employees and a broader range of investors,” said Chief Financial Officer Jack Hartung. “This separation comes at a time when our stock is experiencing record highs, driven by record sales, profits and growth.”

However, Chipotle’s valuation is still high, so investors should pay attention. Often times, stock splits spark the interest of many investors, so you can see a surge in stock prices following a split. And since Chipotle has a very high multiple, investors may want to look for opportunities to get there at a lower valuation.