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Why Did SunTrust Raise Its Target Price for Shake Shack?

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Aug. 18 2020, Updated 6:30 a.m. ET

Analysts’ recommendations

On January 3, 2018, SunTrust Robinson Humphrey raised its 12-month target price for Shake Shack (SHAK) from $50.00 to $60.00 while maintaining its “buy” rating. The current target price represents a return potential of 27.4% from its current stock price.

Senior equity research analyst Jake Bartlett of SunTrust Robinson Humphrey expects the recently passed tax reform bill to increase customer spending, thus driving the SSSG (same-store sales growth) of restaurant companies. In the last few quarters, customer traffic at restaurants was on the lower side, which led to greater competition, discounts, and the launch of value meals.

So, the tax reform bill could help restaurant companies break out of the price war. Bartlett expects Shake Shack to benefit from the tax reforms and has raised his target price.

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Analysts’ target price and ratings

On an average, analysts are expecting Shake Shack’s stock price to reach $41.70 in the next 12 months, which represents a fall of 11.4% from its current stock price. Of the 11 analysts that follow Shake Shack, 36.4% favor a “buy,” 45.5% recommend a “hold,” and 18.2% recommend a “sell.”

Currently, Shake Shack is trading above the analysts’ target price. However, this does not mean an automatic “sell.” Investors are advised to analyze various analyst estimates discussed in our next article before making any investment decisions.

The target prices and return potential percentages of Shake Shack’s peers follow:

  • Chipotle Mexican Grill (CMG): target price of $317.93 with a return potential of 2.9%
  • McDonald’s (MCD): target price of $182.14 with a return potential of 5.6%
  • Wendy’s (WEN): target price of $16.84 with a return potential of 0.8%
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