Shake Shack (SHAK, $67.10) gets "buy" rating at Loop Capital, on same-store sales outlook

Shake Shack's shares got a buy rating and a $78 share-price target at Loop Capital which initiated coverage on the stock.

Loop Capital analyst Lynne Collier mentioned that  comparable-sales figures of the fast food restaurant chain have hit bottom and are turning around.

Shake Shack's same-store sales fell -49% year-over-year in the quarter ended June 24, amid the coronavirus crisis and civil-rights protests that affected the restaurants’ operating hours. The decline was “driven by a decline in traffic of 60.1% and an increase in price mix of 11.1%,” Shake Shack had said in a statement. 

But according to Collier, Shake Shack has performed well in curbside and digital sales, which should lead to "outsized" sales comparison in the intermediate term.

Collier said that concerns about the company’s urban market during the pandemic when many people are moving  to the suburbs have been priced into the stock.

Tickeron's analysis shows: SHAK's RSI Oscillator recovers from overbought zone

The 10-day RSI Oscillator for SHAK moved out of overbought territory on September 16, 2020. This could be a sign that the stock is shifting from an upward trend to a downward trend. Traders may want to look at selling the stock or buying put options. Tickeron's A.I.dvisor looked at 34 instances where the indicator moved out of the overbought zone. In 25 of the 34 cases the stock moved lower in the days that followed. This puts the odds of a move down at 74%.

Current price $67.09 crossed the resistance line at $69.20 and is trading between $69.20 resistance and $64.06 support lines. Throughout the month of 08/31/20 - 10/01/20, the price experienced a -5% Downtrend. During the week of 09/24/20 - 10/01/20, the stock fell -1%.

Technical Analysis (Indicators)

Bearish Trend Analysis

The Momentum Indicator moved below the 0 level on September 28, 2020. You may want to consider selling the stock, shorting the stock, or exploring put options on SHAK as a result. In 52 of 90 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are 58%.

The Moving Average Convergence Divergence Histogram (MACD) for SHAK turned negative on September 17, 2020. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 45 similar instances when the indicator turned negative. In 31 of the 45 cases the stock turned lower in the days that followed. This puts the odds of success at 69%.

Following a 3-day decline, the stock is projected to fall further. Considering past instances where Apple declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 68%.

SHAK broke above its upper Bollinger Band on August 27, 2020. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.

Bullish Trend Analysis

The Stochastic Indicator shows that the ticker has stayed in the oversold zone for 6 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.

SHAK moved above its 50-day Moving Average on August 12, 2020 date and that indicates a change from a downward trend to an upward trend.

The 10-day Moving Average for SHAK crossed bullishly above the 50-day moving average on August 18, 2020. This indicates that the trend has shifted higher and could be considered a buy signal. In 15 of 16 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are 90%.

The 50-day Moving Average for SHAK moved above the 200-day moving average on September 14, 2020. This could be a long-term bullish signal for the stock as the stock shifts to an upward trend.

Following a +4.18% 3-day Advance, the price is estimated to grow further. Considering data from situations where SHAK advanced for three days, in 264 of 344 cases, the price rose further within the following month. The odds of a continued upward trend are 77%.

The Aroon Indicator entered an Uptrend today. In 222 of 267 cases where SHAK Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are 83%.

Fundamental Analysis (Ratings)

Tickeron has a negative outlook on this ticker and predicts a further decline by more than 4.00% within the next month with a likelihood of 57%. During the last month, the daily ratio of advancing to declining volumes was 1 to 1.31.

The Tickeron SMR rating for this company is 95 (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

The Tickeron Valuation Rating of 91 (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (5.88) is normal, around the industry mean (2.07). P/E Ratio (98.35) is within average values for comparable stocks, (66.07). Projected Growth (PEG Ratio) (11.41) is also within normal values, averaging (6.39). Dividend Yield (0.00) settles around the average of (1.27) among similar stocks. P/S Ratio (3.57) is also within normal values, averaging (1.96).

The Tickeron PE Growth Rating for this company is 89 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron Profit vs. Risk Rating rating for this company is 76 (best 1 - 100 worst), indicating that the returns do not compensate for the risks. SHAK’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 80, placing this stock better than average.

The Tickeron Price Growth Rating for this company is 44 (best 1 - 100 worst), indicating fairly steady price growth. SHAK’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.

Contributor

Sergey Savastiouk|Expert

Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.

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