SeeThruEquity Initiates Coverage on Shake Shack, Inc. (NYSE: SHAK) with a Price Target of $53.75

NEW YORK, NY / ACCESSWIRE / March 10, 2016 / SeeThruEquity, a leading independent equity research and corporate access firm focused on smallcap and microcap public companies, today announced it has initiated coverage on Shake Shack, Inc. (NYSE: SHAK) with a price target of $53.75.

The report is available here: SHAK Initiation Report. SeeThruEquity is an approved equity research contributor on Thomson First Call, Capital IQ, FactSet, and Zack’s. The report will be available on these platforms. The firm also contributes its estimates to Thomson Estimates, the leading estimates platform on Wall Street.

Founded in New York by legendary restaurateur Danny Meyer, Shake Shack has emerged as one of the most exciting growth investments in the consumer space. Shake Shack offers a powerful combination of attributes we look for in a consumer growth stock, including: 1) a high quality product with a cult like following; 2) a top-flight management team; and 3) a long runway for domestic and international expansion for years to come. What’s more, Shake Shack already boasts among the industry’s best marks for profitability, sales and operating metrics, and is a clear leader in the broader shift in consumer preferences to “fast causal” dining.

“Shake Shack has produced remarkable results since its IPO in January 2015, with growth accelerating from shack expansion and explosive “same shack” sales performance – which grew at an astonishing 13.3% growth rate in FY15 due to higher average tickets and customer traffic. With strong management, a reputation for great food, and a highly differentiated concept, Shake Shack has the brand power of a multi-billion dollar company that could support over 1,000 units globally and 500 in the US alone, but has only 84 combined domestic and international locations – leaving a clear expansion pathway that could drive a decade of aggressive growth,” commented Ajay Tandon, CEO of SeeThruEquity. “We are initiating coverage with a 12-month price target of $53.75 per share.”

Additional highlights from the report are as follows:

Premiere player in better burger category

Shake Shack has an impressive management team led by CEO Randy Garutti and backed by renowned restaurateur Danny Meyer, who founded the company and serves as Chairman of the Board. With a heritage in fine dining, the company has created a powerful concept that provides “fine casual” dining in unique, compelling décor and a menu that combines fresh burgers and shakes with wine, beer and a localized element in each major market – all at reasonable fast casual price points. As a result, Shake Shack has generated a cult-like following of loyal customers that appears to be expanding well beyond its home market of New York. Indeed, we see the company as emerging as the premiere player in what restaurant industry analysts have dubbed the “better burger” market – a $3Bn segment of fast casual dining that is rapidly taking share from fast food incumbents. We see the better burger market as the most promising space in the fast casual market, as the US hamburger industry is the largest restaurant segment at $76.9Bn in annual sales and appears ripe for disruption.

Strong momentum with a long runway for growth and expansion

We have been impressed by remarkable results turned in by Shake Shack since its IPO in January. On March 7, 2016 company reported strong FY15 results, with “same shack” sales growing at an astonishing 13.3% from FY14 to FY15, and restaurant level profit margins approaching 30%. Overall, Shake Shack revenues rose by 60.8% this year to $190.6mn, with guidance for revenue in a range of $237-$242mn in 2016E. We note that while some investors may have been disappointed with Shake Shack’s guidance for 2016E, management has been very clear about its 2016E expectations for revenue and new store openings, and we do not view the story as changing in any material way.

Rather than being concerned about its growth prospects, we see a long runway for rising sales and profits at Shake Shack. Shake Shack is targeting a goal of at least 450 domestic company owned shacks. The company also has ample room for growth internationally, where management is pursuing a partner-based strategy in which experienced restaurant operating groups license Shake Shack in a territory and remit a percentage of sales. At the end of FY15 the company had just 84 “shacks”- comprised of 44 company-owned shacks, 35 international licensees, and five domestically licensed shacks. Success at the 84 store level demonstrates that Shake Shack can replicate its model in new markets but still leaves more than a decade of room for aggressive growth in sales and profits before the company begins to saturate its market. With growth capital raised from its IPO, a current shelf filing, and licensing partners covering international new store capital spending, we see a clear pathway for Shake Shack to grow aggressively and reach 1,000 global locations by 2025E.

Initiate coverage with a price target of $53.75

Our analysis indicates a fair value estimate of $53.75 per share, implying an upside of 44.4% from the recent price of $37.23. We view Shake Shack as one of the most compelling growth investments in the consumer sector, combining an excellent and well-regarded management team with a well-executed concept and large runway for growth.

Please review important disclosures at www.seethruequity.com.

About Shake Shack, Inc.

Shake Shack® (SHAK) is a modern day “roadside” burger stand known for its 100% all-natural, antibiotic-free Angus beef burgers (no hormones added ever), hot dogs, frozen custard, crinkle cut fries, beer and wine (available at select locations), and more. With its fresh, simple, high-quality food at a great value, Shake Shack is a fun and lively community-gathering place with widespread appeal. From its premium ingredients and caring hiring practices to its environmentally responsible designs and deep community investment, Shake Shack’s mission is to Stand For Something Good. Since the original Shack opened in 2004 in NYC’s Madison Square Park, the Company has opened multiple locations in 13 states and the District of Columbia, and international locations including in London, Istanbul, Dubai, Moscow, Tokyo and more. www.shakeshack.com.

About SeeThruEquity

SeeThruEquity is an equity research and corporate access firm focused on companies with less than $1 billion in market capitalization. The research is not paid for and is unbiased. The company does not conduct any investment banking or commission based business. SeeThruEquity is approved to contribute its research to Thomson One Analytics (First Call), Capital IQ, FactSet, Zacks, and distribute its research to its database of opt-in investors. The company also contributes its estimates to Thomson Estimates, the leading estimates platform on Wall Street.

For more information visit www.seethruequity.com.

Contact:

Ajay Tandon
SeeThruEquity
info@seethruequity.com

SOURCE: SeeThruEquity

ReleaseID: 437689