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On Friday, Wells Fargo (NYSE:WFC) analyst Anthony Trainor increased the price target on Shake Shack stock (NYSE:SHAK) to $115 from the previous target of $95, while keeping an Equal Weight rating on the shares. According to InvestingPro data, the company’s market capitalization stands at $5.4 billion, with the stock trading at notably high earnings and EBITDA multiples. Trainor noted that Shake Shack has consistently met or exceeded revenue expectations since the second quarter of 2023 due to cost-saving initiatives, which aligns with InvestingPro’s observation of expected net income growth this year. However, he believes that most of the straightforward cost-saving opportunities have already been utilized following the implementation of a new labor model and management incentives.
Trainor highlighted that Shake Shack’s next phase of cost reduction is likely to come from supplier savings, which may prove to be a more challenging task. The company’s financial position appears solid, with InvestingPro analysis showing liquid assets exceeding short-term obligations and moderate debt levels. Despite the difficulty, he sees potential for the company to reinvest incremental savings back into the business, particularly in areas where it has historically under-invested, such as marketing. The company’s gross profit margin stands at 38.8%, providing room for strategic investments.
Shake Shack recently entered into a licensing agreement with PENN to open approximately ten licensed units in casinos over the coming years, with the first two expected to open in 2026. This move is part of a broader effort to strengthen the company’s pipeline and improve the profitability of new units. Trainor pointed out that while Shake Shack’s drive-thru prototype is not yet ready for widespread rollout, the company is exploring alternative formats to drive growth and expand its reach.
Additional insights from Trainor include data from May showing a 200-300 basis points acceleration in traffic and card spending compared to the first quarter, according to Placer.AI and Bloomberg ALTD. Consequently, Wells Fargo has raised its second-quarter comparable sales estimate to a 2.1% increase, implying a 4% rise for May and June. However, the firm has lowered its second-quarter restaurant-level margin (RLM) estimate to approximately 23.0%, which is at the lower end of Shake Shack’s guidance and slightly below the Street’s expectations due to increased discounting.
Wells Fargo has adjusted its earnings per share (EPS) estimates for Shake Shack by an additional 3 cents for both 2025 and 2026, resulting in new estimates of $1.31 and $1.58, respectively. The revised price target of $115 reflects approximately 23 times the projected 2026 EBITDA. Recent performance has been strong, with InvestingPro data showing a 7.7% return in the past week and a 34.3% return over the past year. Despite the price target increase, the firm maintains an Equal Weight rating on Shake Shack shares, with 2026 estimates still approximately 5% below the Street’s expectations. For deeper insights into Shake Shack’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Shake Shack Inc . reported its first-quarter earnings for 2025, revealing an earnings per share (EPS) of 10 cents, which fell short of the projected 17 cents. The company’s revenue reached $320.9 million, slightly below the anticipated $330.3 million, marking a 10.5% increase year-over-year. In a strategic move, Shake Shack announced plans to open 12 outlets in Panama by 2035 through a partnership with Grupo Attie-Multifood Enterprises, marking the company’s entry into Central America. Analyst firm TD Cowen downgraded Shake Shack’s stock rating from Buy to Hold, maintaining a price target of $105, citing the company’s current market position and valuation concerns. Meanwhile, Stifel analysts maintained a Hold rating with a $97 price target, noting the company’s updated margin outlook and challenges in the industry. Raymond (NSE:RYMD) James adjusted Shake Shack’s price target to $140 from $145, while maintaining a Strong Buy rating, highlighting operational improvements and growth opportunities. Shake Shack’s ongoing efforts to expand internationally and focus on culinary innovation are part of its broader strategy to enhance market presence and operational efficiency.
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