Shake Shack’s bullish presentation elicits bullish reactions from analysts
As the IC conference continues, the restaurant chain Shake Shack (NYSE: SHAK) gave a presentation outlining the company’s preliminary fourth quarter and full year results, as well as its outlook. The presentation at the investment conference prompted several notable analyst firms, including Loop Capital, Oppenheimer and Piper Sandler, to increase their stock price targets.
According to the presentation, total estimated revenue is $ 158 million for the fourth quarter and $ 523 million for fiscal 2020. Sales of “Same-Shack” (its term for compositions) are in 17.4% year-over-year decline for the quarter, better than a 31.7% year-over-year drop for the third quarter of 2020. Average weekly sales show a steady upward trend by compared to April 2020 lows.
Shake Shack says it plans to open 35 to 40 company-operated outlets in 2021 and another 45 to 50 in 2022. It also plans 15 to 20 licensed restaurant openings in 2021 and 20 to 25 in 2022. Most licensed units will open in Asia.
The presentation went on to say that these new fast-track openings will be supported by more varied menus, digital pre-order, and improved amenities like curbside pickup. The company is highlighting drive-thru as a key convenience that it believes will maintain its ambitious growth targets, with the opening of the first drive-thru point in the fourth quarter of 2021.
Three major analysts seem to agree. Loop Capital raised its price target by 44.6% to $ 120, while saying Shake Shack’s initiatives will maintain growth for several years, potentially supporting a doubling of its current number of restaurants. Oppenheimer highlighted the growth of digital and delivery by increasing its price target by 15% to $ 115, while Piper Sandler increased its target by 41% to $ 110.
Shake Shack’s financial recovery has been strong considering how COVID-19 crushed its sales and revenue at the start of the pandemic.
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