Two of the hottest stocks so far in 2024 are Chipotle Mexican Grill (NYSE:CMG) And Nvidia (NASDAQ:NVDA). Indeed, both companies are considered leaders in their respective sectors.
However, aside from strong sales performance, these two companies share another commonality that is fueling increased purchasing activity. Specifically, Nvidia and Chipotle have an upcoming stock split scheduled for June.
As everyone’s stocks continue to soar, investors may struggle to know which company represents a more attractive long-term position.
Let’s break down the benefits and opportunity costs of owning each stock and evaluate which one seems like the better choice.
The arguments for and against Nvidia
The chart below illustrates Nvidia’s revenue, gross profit and net profit over the past 10 years. Clearly, the last two years have witnessed outsized growth compared to previous periods.
It’s no secret that Nvidia is a major player in the sector. artificial intelligence (AI). The company’s H100, A100, and Blackwell graphics processing units (GPUs) are in high demand among customers such as You’re here And Metaplatforms.
What’s really notable about the above trends is that Nvidia’s growth is accelerating in both revenue and bottom line. By generating excess cash flow, Nvidia is able to reinvest its profits into other growth drivers and strengthen its long-term roadmap.
While all of this is positive, there are some risks that need to be recognized. For now, Nvidia is estimated to have 80% of the AI chip market.
However, increasing competition from Intel, Advanced microsystemsand even big tech companies such as Amazon and existing clients like Meta pose a threat. Each of these companies is develop your own range of chipswhich should ultimately encroach on Nvidia’s lead.
The arguments for and against Chipotle
Chipotle is best known for its tasty wraps and burrito bowls. With 40 million Rewards members, Chipotle has undoubtedly built a loyal customer base with strong brand equity.
One of the ways Chipotle has managed to capture the attention of so many consumers is due to the company’s investments in digital sales strategies.
Similar to Nvidia, Chipotle was able to finance an extremely profitable operation. Its digital sales channels helped fuel a significant increase in margin, which in turn flowed through to the bottom line. While these financial results are encouraging, Chipotle stock carries some risks.
Macroeconomic factors such as inflation and interest rates can impact almost any business. While Nvidia is certainly not immune to these factors, I would argue that a restaurant chain like Chipotle is more susceptible to them.
Discretionary consumption trends are very sensitive and can fluctuate from year to year. I encourage investors to think about this dynamic as it relates to long-term growth prospects.
And the…
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