Why Investors Were Gorging on Shake Shack Stock This Week

Source The Motley Fool

This week's news from hamburger slinger Shake Shack (NYSE: SHAK) was overwhelmingly positive -- hence the stock's double-digit gain over the past five trading days. According to data compiled by S&P Global Market Intelligence, it ended the week more than 12% higher in price. The major impetus to this gain was the company's latest set of quarterly results, accompanied by several analysts' target price raises.

Shaking up a big win

On Wednesday, Shake Shack served up a very tasty meal for investors in the form of its third-quarter results. Revenue rose a sturdy 15% year-over-year to hit $317 million, thanks to a combination of new restaurant openings and a more than 4% rise in same-restaurant sales.

More impressively, the company managed to increase its "pro forma," i.e., non-GAAP (generally accepted accounting principles), or adjusted net income by 48% to just over $11.1 million, or $0.25 per share.

On average, analysts tracking Shake Shack were modeling less than $316 million on the top line, and $0.19 per share for adjusted profitability.

Extra patties from the analysts

Several of those pundits were quick to make upward adjustments on their Shake Shack takes following the earnings release. By my count, no less than seven raised their price targets on the stock by Friday market close, and these bullish moves helped boost sentiment on the company.

Among the raisers was Truist Securities' Jake Bartlett, who hiked his fair value assessment of the stock to $144 per share from the previous $127. In doing so, he maintained his buy recommendation. According to sources, Bartlett wrote in a new research note that management is being quite effective at finding the right price/value dynamic, and has done well with marketing and the speed of service in the company's restaurants.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Truist Financial. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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