What’s Driving Shake Shack Stock?



Stock performance

Shake Shack (SHAK) announced its 2Q17 earnings on August 3, 2017. The company’s SSSG (same-store sales growth) fell 1.8% during the quarter, while analysts were expecting it to be flat. The decline in SSSG led Shake Shack’s stock price to fall to $30.60 at the end of August 30, 2017. However, since then, the company’s stock price has been on the rise.

As of September 22, 2017, Shake Shack was trading at $33.25, which represents growth of 8.7% since August 30, 2017. The measures adopted by the company management such as menu innovations appear to have increased investors’ confidence, leading the company’s stock price to rise. During the quarter, the company introduced the Chick’n Parm sandwich, an eel burger, and Will & Grace and Jack & Karen milkshakes.

Also, the company announced it would open its first test kitchen in the West Village neighborhood in New York City. The new items perfected in the test kitchen will be introduced in restaurants. Also, the company expects to use the facility to develop its chef-driven collaborations.

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Year-to-date performance

Despite the recent rise in its stock price, Shake Shack’s stock is down 7.1% since the beginning of 2017. During the same period, the stock price of peers Chipotle Mexican Grill (CMG) and the Cheesecake Factory (CAKE) have also fallen 16.4% and 30.9%, respectively.

The broader comparative indexes the S&P 500 Index (SPX) and the SPDR Dow Jones Industrial Average ETF (DIA) have returned 11.6% and 13.0%, respectively. DIA invests 4.5% of its holdings in travel and restaurant companies.

In this series, we’ll look at analysts’ EPS estimates for the next four quarters, the company’s valuation multiple, and its target price for the next 12 months. Next, let’s look at analysts’ EPS estimates.


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