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Investing.com - Jefferies downgraded Shake Shack (NYSE:SHAK) from Hold to Underperform on Thursday, while simultaneously raising its price target to $120.00 from $100.00. The stock, currently trading at $136.88 with a market capitalization of $5.84 billion, has delivered an impressive 58.59% return over the past year.
The downgrade comes despite Jefferies’ higher price target, reflecting the firm’s view that recent investor optimism around near-term same-store sales recovery has already been priced into the stock, which recently rallied to all-time highs. According to InvestingPro analysis, the stock appears overvalued, trading at notably high earnings and EBITDA multiples.
Jefferies acknowledged several positive factors for Shake Shack, including recent menu innovation that should provide more visibility into the company’s growth algorithm going forward.
The firm expressed caution about the current promotional environment in the restaurant sector and cited concerns about Shake Shack’s high expectations for restaurant-level margin improvements, which are targeted at more than 50 basis points per year.
Jefferies also noted that Shake Shack’s current valuation is already at or above previous instances when the company delivered similar or greater magnitude of same-store sales upside and acceleration.
In other recent news, Shake Shack has seen a flurry of activity, with several notable developments. Truist Securities recently raised its price target for Shake Shack to $160, citing a positive sales outlook and expecting second-quarter same-store sales growth to exceed consensus estimates. Despite this optimism, Jefferies downgraded Shake Shack from Hold to Underperform, pointing to concerns about the restaurant sector’s promotional environment and high expectations for margin improvements. Loop Capital also downgraded the stock to Hold after it surpassed their price target, though they maintain a positive view on the company’s fundamentals.
In leadership news, Shake Shack appointed Jamie Griffin as the new Chief People Officer to oversee human resources functions and support the company’s expansion plans. Truist Securities had previously increased Shake Shack’s price target to $150, reflecting easing macroeconomic concerns and confidence in the company’s expansion plans despite a slight miss in new store openings. These developments highlight a mix of optimism and caution surrounding Shake Shack’s growth trajectory.
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