Share price of Shake Shack Inc. SHAK tumbled more than 6% in morning trade on Tuesday, May 26 after rising 23.6% over the last six days (from May 15 to May 22). This marked the longest period of continuous increase since the company began trading in Jan 2015. However, over the one day trading session, share price of the company plunged 7.6% to $85.76 on Tuesday. Market analysts have not pointed out any immediate reason for the fall. However, some of them had quite earlier stated that the stock has risen too fast.
Factors that Drove the Rise
Share price of this Zacks Rank #2 (Buy) company has increased approximately 87% since its IPO.
The six day bullish run of the stock can be attributed to two factors. This includes the announcement of reopening of its Madison Square Park location in Manhattan on May 18. Later, on May 21, the share price increased again on the reported filing of an application to trademark the name "chicken shack" by SSE IP, a unit of the company. It is still not clear whether the filing is related to a new menu item like chicken sandwich or even a new restaurant concept based on chicken servings. The possibility of the company expanding to chicken from an only beef menu might have caught investors’ attention. (Read: Shake Shack Rises on 'Chicken Shack' Patent Filing)
Shake Shack, a New York City-based purveyor of burgers, crinkle-cut fries and custard shakes has been popular among investors since it began trading. Shake Shack is well positioned to cash in on the U.S. fast-casual market and increase its earnings with lucrative store economics, a strong brand portfolio and a solid balance sheet. Moreover, its intent to expand into various cities around the world is a positive.
Of late, there have been quite a few fast-casual restaurant operator IPOs. These include El Pollo Loco Holdings Inc. LOCO, Zoe's Kitchen Inc. ZOES, The Habit Restaurants, Inc. HABT and Papa Murphy's Holdings, Inc.
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