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Investors Eyeing Chipotle (CMG) and IBM (IBM) for Skyward Trajectories

Dueling Giants

Two top-notch stocks setting the financial world abuzz are Chipotle Mexican Grill (CMG) and IBM (IBM), both on the brink of scaling new heights.

IBM’s shares recently hit a 52-week peak of $199.18 thanks to a substantial uptick in sales growth. In contrast, Chipotle’s expansion drive has been accentuated by its upcoming 50 to 1 stock split, propelling its shares to over $3,000 each.

Market Dominance

IBM boasts a market capitalization of $177.65 billion, while Chipotle stands at $76.77 billion, firmly establishing their dominance in the computer-integrated systems and retail restaurant sectors.

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IBM’s Revamp

Formerly renowned for its computer hardware offerings, IBM’s strategic shift towards software applications like hybrid cloud and AI has reinvigorated its revenue growth, surging by 5% to $60.53 billion last year, the most significant jump since 2011.

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IBM’s projected sales are set to increase by 3% in fiscal 2024 and another 4% the following year, reaching $66.59 billion. Anticipated annual earnings for FY24 are up 4%, with a further 5% boost expected in FY25 to $10.58 per share. Notably, this would represent a 33% surge over the past five years, edging closer to the pre-pandemic levels of $12.81 per share in 2019.

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Chipotle’s Game-Changer

Chipotle’s remarkable growth trajectory hits a new milestone with its awaited stock split, making its shares more accessible to retail investors. The 50-1 split announcement paves the way for one of the largest stock splits on the NYSE, effective June 26.

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Performance & Prospects

Chipotle’s stock has surged by +27% this year, while IBM has seen a +19% climb, outperforming the S&P 500 and Nasdaq. Over the past year, Chipotle has soared by +78%, with IBM up +54%, surpassing broader market indexes.

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Trading at a reasonable 19.2X forward earnings multiple, IBM sits below the S&P 500 but slightly above the industry average.

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Chipotle, historically commanding a premium due to its growth margins and premium fast-casual status, currently trades at 52.6X forward earnings, lower than the historical high of 231.1X but nearing the median of 49.7X. Post-split, Chipotle’s P/E ratio may rise due to EPS dilution.

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Verdict

Both Chipotle and IBM currently hold a Zacks Rank #3 (Hold). While long-term investors may enjoy gains, caution is advised due to the strong rallies witnessed this year.

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