Shake Shack (SHAK) Stock Down, Wedbush Initiates Coverage
NEW YORK (TheStreet) --Shares of Shake Shack (SHAK) - Get Report are lower by 2.44% to $35.65 in early afternoon trading as coverage was initiated this morning with an "underperform" rating and $30 price target at Wedbush.
The New York-based fast casual restaurant chain is known for its burgers, fries, and shakes and has 84 locations in over 10 countries.
The firm said they expect "continued valuation contraction as near-and-medium-term results decrease the likelihood of more optimistic scenarios."
Wedbush believes existing stores will struggle with sales growth, particularly with the opening of new stores."Given very strong new unit openings, we do not expect SHAK to benefit from a multi-year maturation cycle that serves as a tailwind for other growth restaurants."
While new Shake Shack openings are performing better than expected and may contribute $0.03-$0.13 in EPS for 2016, the firm expects the upside to decline in 2017 and beyond.
Additionally, Wedbush says Shake Shack's current $1.3 billion market capitalization is "unjustifiable even under much more optimistic growth rate, unit productivity, and domestic and international opportunity assumptions."
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate SHAKE SHACK INC as a Sell with a ratings score of D. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and poor profit margins.
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