Why Shake Shack Stock Is Sinking Today
Key Points
Shake Shack trimmed its second-quarter and full-year earnings.
However, the stock is now down 61% from its 52-week high and may deserve a second look from investors.
- 10 stocks we like better than Shake Shack ›
Shares of quickly growing burger and milkshake chain Shake Shack (NYSE: SHAK) are down 11% as of noon ET on Tuesday after the company provided a disappointing business update for the upcoming second quarter. Instead of delivering 19% sales growth in Q2 as previously guided, management now believes revenue will only rise 17% at the midpoint. Similarly, same-store sales growth guidance slipped from 4% to 2.75% at the midpoint, while restaurant-level operating margins look to be at least a percentage point worse than expected. Following today's decline, Shake Shack shares are down 61% from their 52-week high.
Speaking about the business update, Chief Executive Officer Rob Lynch explained, "Our updated guidance reflects the current macroeconomic uncertainty, competitive landscape, and related impacts now that we are more than two-thirds through the quarter, but it's important to emphasize that our fundamental business drivers remain strong."
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Image source: The Motley Fool.
I understand the market's reaction to today's news -- but I also think Shake Shack stock is becoming attractively valued as it navigates the unavoidable cyclicality of being a fast-casual restaurant chain. Though it is impossible to say when broader consumer confidence may improve -- things could still get worse, even -- the company's risk-reward ratio has become too promising to ignore in my opinion. Management plans to reach 1,500 company-operated restaurants over the long haul -- compared to 390 today -- and expects sales and new store count to grow by a low-teens percentage over the next three years.
Having reached breakeven profitability -- and funding its growth in-house with cash from operations (CFO) -- Shake Shack's growth story isn't just a pie-in-the-sky notion. Shake Shack currently trades at near an all-time low 11.5 times CFO, highlighting its very reasonable valuation. If the company wasn't spending heavily on new store growth, it would be producing solid free cash flows to return to shareholders -- but obviously, the growth story is what makes Shake Shack exciting.
This discounted valuation, paired with Shake Shack's potential growth story, improving cash generation, and cult-like following, has me keeping the company on my shortlist of growth stocks to consider buying in June.
Should you buy stock in Shake Shack right now?
Before you buy stock in Shake Shack, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Shake Shack wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $462,983!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,375,447!*
Now, it’s worth noting Stock Advisor’s total average return is 995% — a market-crushing outperformance compared to 212% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of June 2, 2026.
Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Recommended Articles
