Thursday, Truist Securities updated its outlook on Shake Shack (NYSE:SHAK), increasing the price target to $147 from $144 while maintaining a Buy rating on the stock. Currently trading at $125.90, the stock has delivered an impressive 73.2% return over the past year.
According to InvestingPro analysis, analyst targets for the stock range from $102 to $160, with the company currently showing signs of being overvalued based on comprehensive Fair Value calculations. The firm's analysis of Shake Shack's 2024 company-operated new store class has led to a positive outlook on the company's development potential.
The analyst cited an expected beat in store openings for 2024, with two more stores than initially planned, and highlighted the rapid expansion in California following the third-quarter closures in 2024. This expansion strategy aligns with the company's strong revenue growth of 16.4% over the last twelve months, with InvestingPro data showing a healthy financial position with a current ratio of 2.01, indicating strong liquidity to support expansion plans.
The report also mentioned strong new store volumes which signal a robust growth trajectory for Shake Shack, despite anticipating a temporary slowdown in the development of drive-thru locations. The analyst expressed confidence in the brand's near and long-term growth, suggesting that the temporary pullback in drive-thru development is not a significant concern.
With a market capitalization of $5.4 billion and an overall "GOOD" financial health score from InvestingPro, which offers 12+ additional exclusive insights about the company's performance, the company appears well-positioned to execute its growth strategy.
Looking ahead to 2025, the analyst expects a slight increase in same-store sales (SSS) headwinds due to cannibalization from new store sales, projecting an impact of approximately 60 to 70 basis points, up from around 50 basis points in 2024. This forecast takes into account the potential negative effects of new stores on existing locations' sales.
Truist Securities has adjusted its estimates for Shake Shack, lowering expectations for 2024 due to pre-opening expenses and a back-end loaded opening schedule, while raising estimates for 2025. The revised price target reflects these updated projections and the firm's confidence in Shake Shack's strategic growth initiatives and market opportunities.
In other recent news, Shake Shack has been the center of attention among several analysts following strong financial results.
Raymond (NS:RYMD) James maintained a Strong Buy rating on Shake Shack, highlighting the company's potential for sales growth and margin expansion in 2025. The firm also anticipates increased returns on new units. Stifel, while maintaining a Hold rating, increased its price target for Shake Shack to $115 due to stronger-than-anticipated performance. The firm also set its 2025 earnings per share estimate for Shake Shack at $1.25, higher than the Street's expectation.
TD Cowen, expressing confidence in Shake Shack's growth initiatives led by CEO Rob Lynch, raised the company's price target to $140. Baird maintained a neutral rating but increased the price target to $122, noting strengths in profitability and sustained customer traffic. Deutsche Bank (ETR:DBKGn) maintained a hold rating but increased the price target to $133, citing the company's effective marketing and operational improvements.
Shake Shack reported a 14.7% year-over-year increase in total revenue, reaching $316.9 million, and adjusted EBITDA saw a significant rise of 28%, reaching $45.8 million. The company also demonstrated robust expansion plans, opening 17 new locations.
Looking ahead, Shake Shack projects total revenue for Q4 2024 to be between $322.6 million and $327 million, and full-year 2024 revenue is expected to reach approximately $1.25 billion. Adjusted EBITDA for the full year is projected to grow 27% to 29%, reaching between $168 million and $170 million.
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