Unlocking the Potential: Examining Chipotle (CMG) and IBM (IBM) for Future Growth

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By Ronald Tech

Two Titans on the Verge of New Heights

Chipotle Mexican Grill (CMG) and IBM (IBM) are commanding the spotlight as they teeter on the edge of achieving record peaks. Chipotle, with its bold expansion plans and impending 50 to 1 stock split, recently hit dizzying heights of over $3,000 a share, while IBM’s sales renaissance drove its shares to 52-week highs of $199.18.

IBM’s Revival Tale

IBM, once synonymous with hardware, pivoted to software like hybrid cloud and AI, reinvigorating its revenue which surged by 5% last year to $60.53 billion – its most substantial increase since 2011. Projections of a 3% rise in sales for fiscal 2024, coupled with a 4% earnings bump to $10.58 per share, point to a promising future as IBM inches closer to pre-pandemic levels.

Chipotle’s Strategic Move

Chipotle, known for its exponential growth, finally announced a monumental stock split, making its shares more accessible. The anticipated 50-1 split promises to bring CMG shares to around $58, paving the way for more retail investors to hop on board. With its earnings projected to skyrocket by 18% this year and an additional 21% growth forecasted for the next, the future looks appetizing for Chipotle shareholders.

Performance and Valuations Comparison

Year to date, Chipotle’s stock has soared by +27%, outpacing the S&P 500 and Nasdaq. IBM, on the other hand, has seen a 19% climb in its shares, showcasing solid growth momentum. Despite these victories, IBM remains conservatively priced at a forward earnings multiple of 19.2X, slightly edging above its industry average but still below the S&P 500. Chipotle, carrying a premium due to its growth margins, currently trades at 52.6X forward earnings, suggesting a potential upside post-stock split despite the diluted EPS.

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The Verdict

With both Chipotle and IBM holding a Zacks Rank #3 (Hold) currently, investors with a long-term horizon might reap the rewards of their impressive year-to-date performances. However, while the future appears bright for these juggernauts, savvy investors may want to keep an eye out for more attractive entry points down the road.