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Has Shake Shack’s Stock Price Bottomed Out?

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Stock performance

By the end of September 10, Shake Shack (SHAK) was trading at $58.55, a fall of 8.4% since its announcement of its second-quarter earnings results on August 2.

In the second quarter, which ended on June 27, Shake Shack posted adjusted EPS of $0.29 on revenue of $116.3 million, outperforming analysts’ EPS and revenue expectations. The company’s SSSG (same-store sales growth) was in line with analysts’ expectations.

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Despite its impressive second-quarter earnings, Shake Shack didn’t raise its revenue guidance for 2018, citing a delay in the opening of its new restaurants. Investors had been expecting the company’s management to increase its 2018 guidance. Along with the disappointment that it didn’t do so, the 2.6% fall in traffic at its restaurants during the second quarter led to a fall in Shake Shack’s stock price.

Year-to-date performance

Despite the fall, Shake Shack is still trading at a rise of 35.5% since the beginning of 2018. In comparison, its peers Chipotle Mexican Grill (CMG) and McDonald’s (MCD) have returned 69.2% and -4.1% year-to-date, respectively. Meanwhile, the broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which has invested 8.2% of its holdings in restaurant and travel companies, has returned 17.5% since the beginning of 2018.

Series overview

In this series, we’ll look at analysts’ revenue and EPS expectations for Shake Shack over the next four quarters. We’ll also cover management’s guidance for 2018. We’ll end this series by looking at analysts’ recommendations and the company’s valuation multiple. Let’s start our analysis off by looking at analysts’ revenue estimates for SHAK.

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