Shake Shack Inc (NYSE: SHAK)
Earnings Report
On Monday after the close Shake Shack reported tasty earnings to the tune of 9 cents per share on $48.5 million in revenue compared to analyst estimates of 3 cents per share on $42.8 million. Same store sales also climbed to almost 13% while non-GAAP adjusted EBITDA increased 136.5% to $11.2 million. SHAK looks to raise guidance for the remainder of 2015, raising total revenue to $174 million from $171 and they are increasing their domestic store openings to 12 from 10 for the year.
In a statement released with the earnings report, CEO Randy Garutti stated,
“As we execute our strategic growth plan, we continue to identify favorable development opportunities and we have therefore added two new Shacks to our development schedule, raising our previous guidance to 12 new domestic company-operated Shacks for 2015. Looking ahead to 2016 and beyond, we now expect to open at least 12 domestic company-operated Shacks annually. ” SHAK
Unfortunately for SHAK, their great earnings release is being overshadowed by big news out of China. They stated they are devaluing their currency in order to be more competitive in the global market, which is affecting the market as a whole and putting pressure on share prices. SHAK has traded into the red for the day as the market continues to deteriorate and ended up closing at $68.56, a 2.9% drop from yesterdays close.
However, there are concerns on the valuation of SHAK’s share price and where it’s going in the future. TheStreet’s Jack Mohr, co-portfolio manager of the Action Alerts PLUS charitable trust portfolio, had this to say about the company’s earnings:
“Concern is around the valuation, which is teetering on the edge of absurdity. SHAK is currently trading at 20x forward sales; while it is growing twice as fast as its high-growth restaurant peer group (HABT, CMG, LOCO), it is trading at nearly 4x their average valuation. The stock is also trading at well over 100x EBITDA.” TheStreet
Strong growth companies like SHAK tend to have high valuations because it’s hard to benchmark and quantify exactly how much they can grow in a specific time frame and as a result are inherently riskier and more volatile investments. However, if you’re a true believer in Shake Shack’s story then you may be able to get the shares at a discount as market weakness and summer slowness are weighing in on share prices.
SHAK Technicals
After SHAK posted earnings, share prices spiked in post market trading hitting a high of $79.90 before settling down and leveling off around $76. Opening up just over 6% Tuesday morning at $75.04 shares quickly sold off to the 200d SMA on the 5 min. chart where they held their ground for most of the morning before breaking down around lunch time.
SHAK’s IPO debut was on Jan. 30 of this year with an opening price of $47 per share. Share prices have been on a bit of a roller coaster ride as they hit a low of $38.63 before sky rocketing to a high of $96.74 on May 22. The daily chart is pretty clean in regards to important levels with $78.50 and $82.80 providing resistance while $72, $68 and $66 look like they will give some support. Prices took a dip through May and Jun before finding the buyers around $48 and have since trended back up. Volume has been picking up over the past month and moving averages are starting to turn around and point north again.
SHAK has been a popular IPO for 2015 and has provided great returns for early investors. As of the close on July 11, shares were up just over 50% for the year.
Company Profile
Shake Shack, Inc. operates fast food hamburger restaurants. It serves premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. The company’s history roots back to 2004 and was created leveraging USHG’s expertise in community building, hospitality, fine dining, restaurant operations and sourcing premium ingredients. Shake Shack was founded by Daniel Meyer on September 23, 2014 and is headquartered in New York, NY. MarketWatch
