Financial Trading Blog
Stock of the day 10/08/2016 – Shake Shack Inc
It’s been a fairly tumultuous year for Shake Shack, if not one that holds a candle to the kind of swings it saw in 2015 (where it fell from a high of $96.28 to a low of $38 in the space of 7 months). Since 2016 began the company has struggled to break out of a $10 trading bracket between $32 and $42, striking the former in the middle of January and end of March and the latter at the start of March and, most recently, this week. Shake Shack sits at a current trading price of $41.56 (IT-Finance.com, 10/08/2016).
(Source: IT-Finance.com 10/08/2016)
Much of the company’s movement has stemmed from the 2 earnings releases it has produced so far. In the 3 weeks after March’s fourth quarter update the stock plunged nearly 30%, investors balking at Shake Shack’s meagre like-for-like sales forecasts, the burger band expecting 2.5% to 3% growth in 2016 against the 13.3% rise notched up across 2015.
Things improved in May, however, with Shake Shack climbing over 10% on the back of its Q1 results. That update saw a 43% increase in revenue to $54.2 million alongside, more importantly, a chicken-sandwich inspired, and investor-surprising, 9.9% surge in like-for-like sales. The company also bumped up its full year forecasts while announcing it should open 16, not 13, new US stores before the end of its fiscal 2016.
In terms of Shake Shack’s second quarter report analysts are expecting a 44% rise in earnings per share to 13 cents alongside a 30% increase in revenue to $63 million. That may sound impression, but it would mark the 5th straight quarter of revenue deceleration; for example, back in Q2 2015 Shake Shack managed an explosive 75% surge in sales. This isn’t slowdown isn’t unique to Shake Shack, but endemic of the entire restaurant sector, though that likely won’t provide any reassurance for the company’s investors.
Shake Shack Inc has a consensus rating of ‘Hold’ with an average target price of $39.41.
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