Please ensure Javascript is enabled for purposes of website accessibility

Why Shake Shack Stock Jumped Today

By Jeremy Bowman - Mar 17, 2020 at 6:38PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The fast-casual chain recovered some of its recent losses.

What happened

Shares of Shake Shack (SHAK 3.07%) were on the rebound today, making a surprising comeback on a day when restaurant stocks generally fell

The fast-casual burger chain likely benefited from a tailwind in the market as the S&P 500 rose 6% on hopes for a stimulus bill from the federal government that could put cash directly in Americans' pockets at a time when many are getting laid off or seeing income decline from the coronavirus crisis.

On Monday, Shake Shack announced that it was converting to a "To-Go" model temporarily because of the COVID-19 situation. It also pulled its guidance for the year.

The stock plunged yesterday alongside the market, though today investors seemed to be encouraged by the news as it may be a sign that the company continues to get some business during the crisis.

The stock finished the day up 13.6%.

A Shake Shack burger

Image source: Shake Shack.

So what

This morning, Deutsche Bank analyst Brian Mullan lowered his price target on Shake Shack from $71 to $51 in response to the company's update and held his rating at Hold. Mullan's revised price target still called for more than 50% upside before today's gains, however.

The burger chain is likely in for some challenging times. New York, New Jersey, and Connecticut, by far its biggest market, imposed a ban on restaurants with the exception of takeout and delivery, and New York City is considering imposing a "shelter-in-place" that would further restrict residents from going outside. 

Shake Shack did note that delivery is available in all cities from Grubhub and Seamless as well as other delivery apps in some locales, which should help sales.

Now what

Even with today's jump, Shake Shack shares are down 51% since the coronavirus sell-off began on February 24. The stock was high-priced before the recent sell-oof, and could have further to fall. Still, when the crisis fades, it's likely that patrons well flock back to its locations, delighted to be out of their homes and ready for a tasty burger. The company has a great brand and near-record average unit volumes for the fast-food industry. While the outbreak be a stunning blow, it's no knockout punch.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Shake Shack Inc. Stock Quote
Shake Shack Inc.
$43.27 (3.07%) $1.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.