A Time to Sell?
While Nvidia has seen its stock soar due to its involvement in the booming artificial intelligence sector, another stock, Chipotle Mexican Grill, might be even more expensive.
Ram Ahluwalia, founder of Lumida Wealth, an investment advisor specializing in alternative investments and digital assets, pointed out on X, formerly Twitter, that Chipotle's forward price-to-earnings (P/E) ratio is higher than Nvidia's. According to Yahoo Finance data, Chipotle's forward P/E is 59.52 compared to Nvidia's 36.36.
A higher P/E ratio suggests either the stock is very expensive or investors expect higher growth rates from the company. Ahluwalia believes Chipotle's stock could be "riding on momentum that may be at exhaustion." He recommends taking profits, even though he doesn't hold any Chipotle stock himself.
He emphasizes the importance of knowing when to sell, stating, "If you know what to buy, when to buy, when to sell, and how much to buy (position size) you've got it all figured out. Easier said than done. People don't talk enough about ‘when to sell.’ This is one of those moments."
Despite acknowledging Chipotle's thriving business, Ahluwalia believes it's time to sell.
This statement comes after Chipotle reported first-quarter results exceeding expectations. The burrito chain defied inflationary pressure and saw an increase in foot traffic and transactions despite rising menu prices. The company also raised its sales guidance for the year.
Chipotle's board approved a 50-for-1 stock split in March. If shareholders approve the split at the annual shareholders meeting on June 6, the stock will begin trading on a split-adjusted basis on June 26.
The average analysts' price target for Chipotle, according to TipRanks, is $3,206.07, suggesting a mere 0.60% upside from current levels.
Chipotle ended Friday's session up 2.41% at $3,186.97.