Shares of Shake Shack Inc. SHAK gained more than 18% in the trading session on Jul 29, as the company enjoyed its best day at the stock exchange. The stock closed at $62.15, marking the highest one-day gain since it began trading on the New York Stock Exchange.
The rise in the stock price comes as the company has completed 180 days after the Initial Public Offering (IPO) on Jan 30. Therefore, the lock-up period, which restricts the company insiders and those holding majority stakes from selling any of the shares, has now expired. This possibly led to the shares surging.
Shake Shack has been one of many successful restaurant IPOs in 2015 as the revenue and earnings growth potential of these chains is gaining investors’ attention. In fact, shares have gained more than 35% to-date since it started trading.
With its cult following and successful expansions into cities from Chicago to Dubai, Shake Shack has come a long way from being a hot dog cart in Madison Square Park, NYC in 2001. Currently operating a total of 63 stores, the company plans to open 10 shacks in 2015 and continue the pace in later years.
Shake Shack is known for using 100% all-natural Angus beef that is not fed with hormones or antibiotics. It serves shakes and frozen custard in addition to cheese crinkle fries, one of its signature dishes. We believe the company is positioned well to cash in on an attractive segment of the U.S. fast-casual market and increase its earnings with lucrative store economics, strong brand portfolio and solid balance sheet.
In fact, the fast casual restaurant sector is gaining popularity of late. As millennials shift the spending trend away from classic chains like McDonald's Corp. MCD, investors are looking for new stocks that can replicate the success of Chipotle Mexican Grill, Inc. CMG.
Shake Shack currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the restaurant industry is BJ's Restaurants, Inc. BJRI, which sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment