Fast-casual restaurant chain Shake Shack (NYSE:SHAK) notched an extra 1.5% in premarket trading overnight and kept that momentum going into today's trading as well. The company recently noted some expansion plans that made investors happy, though the word from the broader investment community is urging caution.
Shake Shack Eyes New Markets in China
The Shake Shack menu has proven a draw nearly anywhere a Shake Shack is located, and plans had been announced previously for Shake Shack to expand out from its standard urban locations and move into more suburban markets. However, Shake Shack's latest expansion plans caught a lot more attention from investors as the company looked to move into the Chinese market as well.
The reports noted that, by 2031, Shake Shack planned to open 10 locations in new territories. Slated to be led by Chinese licensee Maxim's Caterers, the plans would see Shake Shack locations emerge in Anhui, Chongqing, Guizhou, Henan, Hubei, Shaanxi, Sichuan and Yunnan, among others. With the new locations operational, this would put the total number of Shake Shack locations in China at 79. Right now, reports note, there are only 16 locations in China, including recently-opened locations in Macau and Shenzhen. A Hangzhou location to open before the year is out.
As China is currently considered Shake Shack's fastest-growing market outside of the United States, expansion efforts in that region will likely help fuel further growth. Such growth will likely take place; a note from Shake Shack quoted Michael Wu, who serves as Maxim's Caterers chairman and managing director, as saying that more comprehensive expansion plans for the Chinese market were continuing development.
How Do Financial Analysts Feel About Shake Shack Stock?
Though Shake Shack is pursuing fairly aggressive growth, and investors are responding accordingly, the broader financial analyst pool's Shake Shack stock forecast encourages caution instead. Shake Shack stock is currently rated a consensus “hold”, and has held that rating steadily for the last two years.
A year ago, Shake Shack had five “buy” ratings, along with 11 “hold” and three “sell” ratings. Six months ago, that changed to six “buy” ratings, along with 11 “hold” and three “sell.” Today, there are only five “buy” ratings once more, but there are also only seven “hold” and two “sell” ratings. The ratio does seem to be narrowing, though it's still weighted in favor of “hold”, at least for now.
Shake Shack price targets, meanwhile, have a fairly broad range. The current average price target is $97.94 per share, with a high of $150 and a low of $50. With Shake Shack stock trading at $98.13 as of this writing, there is a slight downside potential involved as the company hovers around that average price target.
There have been few recent developments for Shake Shack, and these have been mixed overall. The latest from June 16 featured Oppenheimer's Michael Tamas giving the company a “buy” rating, with a price target of $124. Tamas noted that the company's feature set—especially its drive-thru operations—provide “exciting opportunities” for growth into 2022 and beyond. TipRanks notes that hedge funds currently have “neutral” level confidence in Shake Shack, as there was a decrease of 210,900 shares across four hedge funds active in the last quarter.
Meanwhile, in May, both Goldman Sachs and Wedbush upgraded outlooks and price targets on the company. Goldman Sachs went from “neutral” to “buy” and raised its price target from $107 to $109. Wedbush, meanwhile, upgraded from “neutral” to “outperform”, and upgraded its price target from $114 to $118. Deutsche Bank, Cowen and Morgan Stanley, meanwhile, all lowed their price targets on the company in May, with Deutsche Bank going from $107 to $95, Cowen going from $97 to $93, and Morgan Stanley dropping from $104 to $101.
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