Wall Street says this beaten-down burger stock could be the next big comeback
Investing.com -- Shake Shack shares could be poised for a rebound after a sharp selloff, according to analysts at Stifel, who upgraded the fast-casual burger chain despite weaker-than-expected first-quarter earnings and soft April sales trends.
Stifel upgraded the ratings on the stock to “Buy” from “Hold” while lowering its price target to $85 from $105, arguing that the market reaction has been excessive as the stock now trades near decade-low valuation levels at roughly 12.5 times next-twelve-month EBITDA. Analysts said the current share price presents an attractive entry point for investors willing to look beyond near-term volatility.
The brokerage believes Shake Shack can drive meaningful long-term earnings growth through operating leverage and expanding restaurant margins. Management’s efforts to reduce general and administrative costs and improve free cash flow generation are seen as key catalysts for a future re-rating of the stock.
While same-store sales slowed in April, Stifel noted that early May traffic improved following the launch of the company’s Smoky BBQ menu. The firm maintained its second-quarter same-store sales forecast of 3.5%, implying stronger momentum through the rest of the quarter. Analysts also pointed to Shake Shack’s exposure to U.S. World Cup host markets, which could support demand trends later in the year.
Stifel said Shake Shack’s long-term growth outlook remains intact, supported by mid-teens unit expansion, ongoing menu innovation, digital engagement initiatives, and operational improvements aimed at boosting throughput and customer experience. The firm also highlighted the success of new restaurant prototypes, including drive-thru formats, as supporting the company’s long-term potential to exceed 1,500 locations globally.