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Shake Shack's Stock Could Crumble 20%: Pro

Bret Kenwell

Shares of Shake Shack are off session lows, but the stock is still down about 2.1% to $45.25 on Friday.

What's got the stock down and why did Shake Shack fall more than 5% at the open? Simple: a downgrade. Jefferies analyst Andy Barish slapped Shack Shack with an underperform rating and a $36 price target. As of Thursday's close, that implied almost 22% downside in the New York City based burger company.

Some of the hometown fans may not be too happy to see Barish's take, although he's not knocking the company's long-term potential. In fact, Barish says he still believes that Shake Shack has a bright future. However, even with Friday's fall, Shake Shack stock is still up more than 45% since September 1st.

"Much of that [potential] is already discounted in the current valuation," he contends. In essence, he's calling the stock overvalued based on its current business given the run in the share price.

Barish also makes the point that traffic will likely be negative in 2018, due to "store cannibalization, high volumes and a small comp base."

Will Wall Street respect that call or will investors continue to bid the stock higher? While we don't know the longer-term implications, we can see that there's a bit of a debate already on Friday. While shares are down on the day thanks to the analyst's call, it's off the lows by quite a bit.

Let's see how Shake Shack stock trades through the holiday-shortened week after Christmas.

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