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Analysts Recommend a ‘Hold’ for Shake Shack

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Dec. 24 2018, Updated 10:05 a.m. ET

Analysts’ recommendations

Among the 12 analysts that cover Shake Shack (SHAK), 33.3% favor a “buy” as of December 20, while 50% have given the stock a “hold” rating, and 16.7% have given it a “sell.” On average, analysts have set a 12-month price target of $53.09, which represents an upside potential of 21.9% from its current stock price of $43.56.

On December 19, Jefferies upgraded Shake Shack from “sell” to “hold,” while retaining its price target of $45. On the same day, Barclays lowered its price target from $56 to $51. Earlier, on December 12, Stifel cut its price target from $65 to $55.

In November, after Shake Shack’s third-quarter earnings, J.P. Morgan, SunTrust Robinson, Cowen and Company, and Wedbush all slashed their target prices.

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Peer comparisons

Among the 33 analysts covering Chipotle Mexican Grill (CMG), 39.4% have given the stock a “buy” rating, while 45.5% are favoring a “hold,” and 15.2% are recommending a “sell” rating. On average, analysts have set a 12-month price target of $469.88, which represents an upside potential of 17.3% from its stock price of $400.77.

Among the 32 analysts covering McDonald’s (MCD), 78.1% recommended a “buy,” while 21.9% recommended a “hold.” On average, analysts have set a price target of $195.4, which represents an upside potential of 12.5% from its stock price of $173.68.

Valuation multiple

The decline in Shake Shack’s stock price has lowered the company’s valuation multiple. As of December 20, Shake Shack was trading at a forward EV-to-sales multiple of 2.78x compared to 3.59x before the announcement of its third-quarter earnings. On the same day, peers Chipotle Mexican Grill and McDonald’s were trading at forward EV-to-sales multiples of 2.01x and 7.84x, respectively.

Next, we’ll look at analysts’ revenue expectations for 2018 and 2019.

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