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Investing.com-- Truist Securities analysts have reiterated their "Buy" rating on Shake Shack Inc (NYSE:SHAK) highlighting a favorable setup for both near- and long-term growth despite a recent pullback in the stock.
SHAK shares dropped 12% on February 21, significantly underperforming the S&P 500’s 1.7% decline, creating what Truist analysts call a "tasty opportunity" for investors.
Analysts maintained their price target of $154 on the stock.
Truist analysts noted that Shake Shack’s fundamentals remain strong, citing solid same-store sales (SSS) trends and promising catalysts.
While SSS slowed in February to around 1.0%, down from 3.7% in January due to adverse weather and a promotional gap, Truist card data shows a recent re-acceleration, with SSS expected to rebound to 4% in March, supported by warmer weather and increased marketing efforts.
Longer-term, Truist sees multiple growth drivers for SHAK, including expanded marketing, digital and loyalty programs, and improved speed of service.
The company’s marketing spend increased by 78% year-over-year in 2024, with plans to launch new limited-time offers in spring. Investments in digital infrastructure and loyalty programs are expected to boost customer engagement, while enhanced kitchen processes have already cut service times by 60 seconds, improving throughput, analysts wrote.
Truist analysts also emphasized Shake Shack’s ongoing margin expansion, driven by supply chain improvements and labor savings.
Despite the stock’s 47% gain since December 2023, analysts believe valuation remains attractive, with future earnings growth and margin improvements supporting the $154 price target.