Shake Shack (SHAK) Stock Trades Up, Here Is Why
What Happened:
Shares of fast-food chain Shake Shack (NYSE:SHAK) jumped 26.5% in the morning session after the company reported fourth-quarter results that beat across the board on all key metrics from sale-store sales to revenue to profits to EPS. FCF even came in higher than expected and was positive rather than the loss projected by Wall Street analysts. Zooming out, this was a fantastic quarter that should have shareholders cheering.
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What is the market telling us:
Shake Shack's shares are quite volatile and over the last year have had 13 moves greater than 5%. But moves this big are very rare even for Shake Shack and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 2 months ago, when the company gained 6.8% following the announcement that Randy Garutti, the CEO of the company, will retire in 2024 upon the selection of his successor. The Board of Directors, spearheaded by Korn Ferry, commenced an external search for a suitable replacement.
Additionally, the company reaffirmed its Q4 and FY'23 guidance, indicating that the leadership transition is not expected to have a significant short-term impact, reassuring investors. Cowen analyst Andrew Charles expressed optimism about the change, noting, "As is the natural evolution with businesses, we believe this allows Shake Shack the opportunity to hire an executive with a background from a more scaled (ideally restaurant) growth organization. In our view, this is facilitated by Directors Chuck Chapman and Jeff Lawrence's experiences at Panera and Domino's, respectively, who will be a part of the search committee."
Shake Shack is up 29.8% since the beginning of the year. Investors who bought $1,000 worth of Shake Shack's shares 5 years ago would now be looking at an investment worth $1,794.
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