Shake Shack stock soared 7% on Tuesday and has seen a 14% increase in August, driven by its exceptional second-quarter earnings report. The burger and shake restaurant chain reported a remarkable 44% rise in net income, leading to multiple analysts upgrading their price targets for Shake Shack.
The stock has been on a tear recently, surging 14% since the earnings release on August 1st. After hitting nearly $105 per share following the earnings announcement, Shake Shack experienced a slight dip during Monday’s market selloff but rebounded on Tuesday with a 5% gain to reach $101 per share.
Despite a previous slump earlier this year, with a 25% decline to below $80 per share, the recent gains have almost completely wiped out those losses, with Shake Shack stock now up 34% year-to-date.
Profits Increased 44% in Q2
The strong second-quarter results defied industry trends as Shake Shack reported record revenue of $316 million, exceeding estimates of $314 million. System-wide sales, including all 540 Shake Shacks, reached $484 million, up 13% year-over-year.
The company’s operational efficiency also improved, with restaurant-level profit hitting $67 million, representing 22% of sales. Operating profit more than doubled to $10.8 million, while net income surged 44% to $10.4 million.
On Track to Reach Guidance
The robust performance in Q2 has positioned Shake Shack to achieve its fiscal 2024 goals, including revenue growth of 14-15% and a 25% increase in adjusted EBITDA. The company aims to enhance its restaurant-level profit margins and generate positive free cash flow by 2024.
For the third quarter, Shake Shack anticipates revenue between $311 million and $317 million, with plans to open new restaurants and licensed Shake Shacks.
Is Shake Shack Stock a Buy?
Following the earnings release, Shake Shack received multiple price target upgrades, with analysts setting a median target of $112 per share. While the stock has shown strong growth, its high valuation and economic uncertainties may pose challenges in the near future.
While Shake Shack remains a stock to watch, investors may want to be cautious given its current valuation and market conditions.