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Shake Shack Is Overpriced - New Price Target Set

Overview

Last week following Shake Shack's (SHAK) IPO, we issued guidance that the immediate hype and sell-off to follow presented an excellent opportunity to short sell. Since the guidance issued around a share price of $49, the stock has fallen to almost $42 per share, a 14% price drop. Following this week's sell off of shares we are reissuing guidance that we remain Shake Shack is a Strong Sell. Last week following the IPO we explored traditional price-to-earnings and EBITDA-to-market valuations, this week we will focus on a non-traditional valuation metric that will be very useful in evaluating the long-term performance of fast-casual restaurants. Using Market Value per Store Sales indicated that Shake Shack is still highly overvalued and will likely continue to retreat closer to industry averages.

Sales per Store

Shake Shack is a leader for sales per owner-operated store within the fast-casual industry. The primary reason is that… Read More …