Investing.com -- Shake Shack's growth story has hit a speed bump, prompting major Wall Street firms to downgrade the restaurant chain after management reduced its second-quarter and full-year profit outlook.

Both Morgan Stanley and Raymond James lowered their ratings on the burger chain after the company trimmed guidance ahead of an investor conference, citing softer-than-expected sales trends, rising commodity costs, and weaker tourism demand.

Morgan Stanley downgraded the stock to Equal-Weight from Overweight and slashed its price target to $76 from $115, arguing that the traffic growth and earnings visibility it expected for 2026 have failed to materialize. The firm noted that Shake Shack has now reduced expectations twice in quick succession, damaging investor confidence.

Raymond James similarly cut its rating to Outperform from Strong Buy, lowering its target price to $85 from $125. Analysts said intensified beef and energy inflation, along with margin volatility, could take time for management to overcome.

The company lowered its second-quarter same-store sales outlook to 2.5%–3.0% growth, down from a prior range of 3%–5%, while reducing revenue and restaurant margin expectations. Management cited softer tourism trends and ongoing inflation in beef, fuel surcharges, delivery fees, and maintenance expenses.

Analysts also cut earnings forecasts. Morgan Stanley reduced its 2026 EBITDA estimate to $225 million from $237 million, while Raymond James lowered its 2026 adjusted EBITDA forecast to $222 million.

Despite the near-term challenges, both firms maintained a constructive long-term view of the company. Analysts highlighted Shake Shack's continued restaurant expansion, international licensing business, and attractive valuation. Shares closed at $57.01 on June 2, near the bottom of their 52-week trading range and trading at roughly 11–12 times forward EBITDA, well below many restaurant growth peers.

Investors now appear focused on whether Shake Shack can restore confidence in its growth trajectory and margin outlook as it enters the second half of 2026. Both research firms noted that while the stock may offer attractive upside if execution improves, rebuilding credibility with the market will likely take time.