Wall Street Just Isn't Hungry for Shake Shack Any More
Bearish speculators are increasingly shorting Shake Shack (SHAK) - Get Report after the burger chain reported a decline in same-store sales for the second quarter last week and cut its full year guidance.
Shake Shack shorts reached their highest level since the company went public in 2015 this week, S3 Partners analyst Matthew Unterman wrote in a Friday note. "11.1 million shares are currently in the hands of short sellers, with $353.7 million at risk," Unterman said.
Short sales have increased 89.5% since January. At the beginning of the year, $208.9 million was at risk, meaning a 69.3% increase in the seven months since. Untermain said that the increase in demand to borrow shares to sell short has triggered financing rates to trend higher after they consistently traded at 1% for the majority of this year.
Year-to-date, short sellers have yielded an average return of 10.1% on a short position of $303.2 million with paper profit of about $30.4 million. Shake Shack's stock continues to trade above 50 times its projected 2018 earnings per share, suggesting to eager bears that its valuation is about to be charred to a crisp.
Shake Shack stock traded up about 1% Friday morning to $32.28. It's down nearly 10% this year.
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