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Can 1Q16 Results Stem the Decline of Shake Shack’s Share Price?

Ralph Nathan

Can Shake Shack’s 1Q16 Results Set the Road for Recovery?

SHAK’s stock performance

A New York–based fine casual restaurant chain, Shake Shack (SHAK) is set to announce its 1Q16 results on May 12, 2016, after the Market closes.

Shake Shack went public in January 2015 at an IPO price of $21 per share. Investor optimism about SHAK’s growth prospects pushed the stock up, peaking at $96.80 on May 22, 2015. Since then, the company’s share price has been on a downswing as investors became wary of paying such a high multiple for its growth.

Although its 4Q15 results were better than expected, the expansion plans failed to impress investors. Since March 7, 2016, the share price has declined by 13.5%.

During the same period, other competitors in the fast casual restaurant space have experienced selling pressure due to an increase in wages and declining margins. Shares of SHAK’s peers Panera Bread (PNRA), Chipotle Mexican Grill (CMG), and Jack in the Box (JACK) have declined by 0.4%, 21.1%, and 2.3%, respectively.

During the same period, the broader comparative benchmark index, the Guggenheim S&P 500 Pure Growth ETF (RPG), rose by 2.8%. RPG has 44% of its holdings invested in restaurants and travel companies.

Series overview

With Shake Shack’s (SHAK) 1Q15 results just around the corner, this pre-earnings series will focus on what to expect in the earnings release. The series will cover analysts’ estimates on the company’s revenue, EBITDA margins, and EPS (earnings per share). Finally, we’ll look at the company’s valuation multiple and expected stock price over the next 12 months.

Let’s start by looking at SHAK’s 1Q16 revenue expectations.

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