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Why Shake Shack Is Trading Close to Its 52-Week High

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Stock performance

On December 8, 2017, Shake Shack (SHAK) hit a new 52-week high of $46.56 and closed the day at $46.30, which represents a 24.6% rise since the announcement of its 3Q17 earnings on November 1, 2017.

For 3Q17, Shake Shack had reported EPS (earnings per share) of $0.17 on revenues of $94.6 million. Analysts were expecting the company to post EPS of $0.15 on revenues of $94.5 million.

The company also outperformed the analysts’ SSSG (same-store sales growth) estimate of -2.6%, posting a decline in SSSG of 1.6%. After reporting strong 3Q17 earnings, the company’s management raised its SSSG, revenue, and EPS guidance.

Notably, on December 7, Morgan Stanley upgraded the stock from “underweight” to “equal-weight” and raised its target price from $34 to $41. All these factors appear to have increased investors’ confidence, leading to a rise in the company’s stock price.

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Year-to-date performance

Since the beginning of 2017, Shake Shack has returned 29.4%. During the same period, peers Chipotle Mexican Grill (CMG), Wendy’s (WEN), and Jack in the Box (JACK) have returned -16.3%, 12.8%, and -6.3%, respectively.

The iShares US Consumer Services ETF (IYC) and the S&P 500 Index (SPX) have returned 16.8% and 18.4%, respectively, during the same period. SPX has 12.0% of its portfolio in restaurants and travel companies.

Series overview

In this series, we’ll assess the analysts’ revenue and EPS estimates for Shake Shack for the next four quarters, cover SHAK management’s guidance for 2017, and evaluate the analysts’ recommendations as well as SHAK’s valuation multiple.

In the next part, we’ll take a closer look at the analysts’ revenue estimates for SHAK.

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