Jefferies drops bearish outlook on Shake Shack as company beefs up promotions, innovations

[Shake Shack]
mizoula

As part of a broader review of the fast-casual dining space, Jefferies analyst Andy Barish upgraded Shake Shack (NYSE:SHAK [https://seekingalpha.com/symbol/SHAK]) to Hold from Underperform, citing the recent pullback in shares and marketing investments expected to boost same-store sales (SSS) in the coming quarters.

“While we continue to see moderate risk to near-term SSS and the sustainability of recent sales/traffic initiatives, we believe expectations have been appropriately reset and view risk/reward as more balance with the recent pullback in SHAK,” Barish writes in his note to clients.

With a “robust” innovation pipeline (French Onion Soup Burger, Coffee Shake) along with digital campaigns and promotion offers like the “Buy One Get One” shake offer in September, Barish believes Shake Shack (NYSE:SHAK [https://seekingalpha.com/symbol/SHAK]) can support low single-digit SSS and a similar exit rate into October.

And while higher beef prices will weigh on margins, additional opportunities exist and should support a multi-year ramp up on profit margins

“We think SSS consistency will also contribute to committed 30 basis points+ margin expansion through FY26 with room for additional gains over time should traffic/SSS momentum surprise to the upside.”

To reflect the recent retracement in shares, Barish lowered his price target for Shake Shack (NYSE:SHAK [https://seekingalpha.com/symbol/SHAK]) by 14% to $95, reflecting a 19x 2026 EBITDA estimate, and representing 10% upside to Friday’s closing price.

Wall Street analysts and Seeking Alpha authors are mostly bullish on Shake Shack (SHAK [https://seekingalpha.com/symbol/SHAK]) with a consensus Buy rating, while Seeking Alpha’s Quant score is more cautious, viewing the stock as a Hold with a Quant score of 2.80 out of 5.

Shake Shack (SHAK [https://seekingalpha.com/symbol/SHAK]) reports third quarter results before the market open on Thursday, October 30, expected to report an adjusted profit of $0.32 per share on $363.7M in sales.

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