Shake Shack Reports Earnings Beat

Shake Shack Inc. (Ticker Symbol: SHAK) stock is on fire today after the company reported better than expected quarterly earnings and raised its revenue forecast for the year. Shake Shack reported an earnings per share beat .27 cents per share vs. Wall Street analysts’ expectations of .23 cents per share. The burger chain reported revenues at $152.7 million vs. Wall Street analysts’ expectations of $149.5 million, which showed a 31% increase from this time one year ago. Shake Shack announced that same-store sales rose 3.6% vs. Wall Street analysts’ expectations of 2.0%.    

The burger chain announced that they would be increasing its revenue forecast for the year, citing strong sales in its international stores, especially in Asia.  The company now is looking for revenue to be between $585 and $590 million which is up from its prior forecast of $578-$582 million. Shake Shack announced earlier this week that they would be teaming up with food delivery service Grubhub, to offer delivery services to its customers. The new delivery service will be tested out in four cities domestically:  Morningside Heights in New York, the River North area of Chicago, Livingston, New Jersey, and Darien, Connecticut.

Shake Shack priced its IPO at $21 per share and the stock began to trade on the morning of January 30, 2015 at $47 per share.  The stock took off over the next six months to trade to a high of $96.75, before beginning to pull back after its second public earnings report.  Shake Shack pulled back below its opening trading price of $47.00 per share at the end of 2015. Starting in the first quarter of 2016, Shake Shack spent its time trading in a range between the $30.00 and $45.00 price levels for the next two and a half years.  

Shake Shack finally broke out of its trading range in the second quarter of 2018 led by a strong quarterly earnings and guidance report.  The stock rallied and then began to form a Double Top reversal pattern in the third quarter of 2018. A Double Top occurs when the price of an asset reaches a high price, has a small pullback, then retests that high, failing to break above it. The pattern is confirmed once it breaks below the low between the two prior highs.  Shake Shack proceeded to give all of its previous move back before finding support around the $40.00 price level. The stock has had a great start to 2019, having two strong quarterly earnings reports thus far and the stock is up over 85% year-to-date. 

(Chart above courtesy of ​www.tipranks.com​)  

Based on a survey of 9 analysts offering 12-month price targets, the average price target for Shake Shack’s stock is $76.56. According to that number, the stock is priced at a premium relative to Wall Street’s analysts and could be considered overvalued around current levels near $86.72.

Shake Shack had a rough time during the first few years of its initial public trade. Since then, the company has found ways to become profitable while expanding globally. Investors in the fast-food company should look out to Shake Shack’s next earnings report on November 3rd for fresh news within the company.  

 


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