Shake Shack's Positive Digital Sales Get Buy Rating at Loop Capital

Shake Shack’s comparable-sales numbers are turning around, Loop Capital says, initiating the stock as a buy.

Shake Shack's  (SHAK) - Get Shake Shack, Inc. Class A Report comparable-sales numbers are turning around, Loop Capital analyst Lynne Collier says, initiating coverage of the burger chain at buy with a $78 share-price target.

The New York company's comparable sales have hit bottom and a "brand transformation" has begun, the analyst said, according to The Fly.

Shake Shack has done well in curbside and digital sales, which should trigger "outsized" sales comparison in the intermediate term, she said. 

Worries about the company’s urban focus at a time when people are fleeing to the suburbs to escape the coronavirus have been priced into the stock, Collier said.

Shake Shack's same-store sales plunged 49% in the quarter ended June 24 from a year earlier amid the coronavirus pandemic and civil-rights protests that reduced the restaurants’ operating hours.

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The drop was “driven by a decline in traffic of 60.1% and an increase in price mix of 11.1%,” Shake Shack said in a statement. 

“Same-Shack sales improved during the quarter, delivering 64%, 42% and 42% declines for fiscal periods April, May and June, respectively.”

The company opened four new company-operated Shake Shacks, in Sacramento, Calif., Los Angeles, Charlotte and St. Louis, in the latest quarter. Each of them “opened with encouraging levels of sales,” Shake Shack said.

Revenue totaled $91.8 million for the latest quarter.

On a day when the market is indicated sharply lower, Shake Shack’s shares recently traded unchanged at $64.87. The stock has jumped 22% over the past three months through Thursday, compared with a 9% gain for the S&P 500.