In a report released today, Chris O`Cull from Stifel Nicolaus maintained a Hold rating on Shake Shack (SHAK – Research Report), with a price target of $120.00.
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Chris O`Cull has given his Hold rating due to a combination of factors that affect Shake Shack’s current and future performance. The company has shown promise with a 3.7% increase in January’s comparable sales, despite challenges like adverse weather conditions and wildfires. However, the forecast for the first quarter anticipates a more substantial impact from weather, along with other factors such as the absence of new menu innovations compared to the previous year.
Furthermore, while Shake Shack has raised its EBITDA guidance by $5 million, reflecting confidence in achieving its restaurant margin goals, there are still concerns about the sustainability of sales-driving initiatives to grow traffic. The expected flat to slightly positive traffic for the year, coupled with ongoing challenges in commodity and wage inflation, particularly with beef prices, contribute to the cautious outlook. Overall, the strategic initiatives and management’s efforts to improve efficiencies are promising, but more evidence is needed to support a more optimistic rating.
In another report released today, Morgan Stanley also maintained a Hold rating on the stock with a $137.00 price target.