What’s Driving Shake Shack’s Stock Price?



Stock performance

On January 4, 2017, Shake Shack’s (SHAK) stock rose 7.7% to $38.9. The announcement that the company will be added to the S&P SmallCap 600 Index after the close of January 4, 2017, led to a rise in Shake Shack’s share price. Generally, when a company is added to a major stock index, its stock price moves up.

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SHAK’s 2016 performance

2016 was a tough year for Shake Shack. The company’s stock returned -7.6% in 2016. The lower-than-expected 2Q16 same-store sales growth, investors’ skepticism about Shake Shack’s expansion plans, and the widening gap between the cost of eating at home and the cost of dining out led to the fall in the company’s stock price. However, strong 3Q16 earnings, the improved fiscal 2016 sales guidance, and Donald Trump’s victory, offset some of the declines in its stock price. Investors expect Trump to loosen regulations, which could benefit restaurant chains.

In 2016, Shake Shack peers Chipotle Mexican Grill (CMG) and Panera Bread (PNRA) returned -15.9% and 8.9%, respectively. During the same period, the broader comparative index, the iShares US Consumer Services ETF (IYC), returned 7.7%. IYC has invested 11.8% of its holdings in restaurant and travel companies.

Series overview

In this series, we’ll look at analyst estimates for Shake Shack’s revenue and EPS (earnings per share) for the next four quarters. Finally, we’ll look at Shake Shack’s valuation multiple and analysts’ recent recommendations and target prices for the next 12 months.

Let’s start by looking at analysts’ revenue estimates for the next four quarters.


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