Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Shake Shack (NYSE:SHAK) initially plunged more than 10% Thursday and then recovered to trade up around 1% as of 2:30 p.m. after the company announced fourth-quarter results.
So what: Revenue climbed 51.5% year over year to $34.8 million, helped by "same-Shack" sales growth of 7.2%, excluding sales from the 14th week in the quarter. Shake Shack also opened 10 systemwide restaurants during the quarter, including five domestic company-owned locations and five international licensed restaurants. Meanwhile, Shake Shack's quarterly net loss was $1.4 million, or $0.05 per diluted share. After accounting for around $1.1 million in after-tax expenses associated with Shake Shack's IPO last month, however, its adjusted net loss came in at roughly $0.01 per share. Analysts, on average, were expecting an adjusted loss of $0.03 per share on sales of $33.1 million.
Now what: This volatility isn't surprising considering Shake Shack's adjusted earnings were at first unclear. This also marks Shake Shack's first quarterly report as a publicly traded company, and the stock has more than doubled from its IPO price to sit around $47 per share as of this writing. Even so, keep in mind Shake Shack ended the year with 63 locations -- of which 31 were domestic and company-owned -- and management sees the potential to gradually grow domestic company-operated restaurants to "at least 450."
In the meantime, Shake Shack expects fiscal 2015 revenue to be between $159 million and $163 million, with same-store sales growth in the low single digits and at least 10 new domestic company-owned locations. Wall Street was modeling 2015 sales below the mid-point of that range at $160.7 million.
All things considered, though Shake Shack stock has had an impressive climb so far, I can't blame the market for its optimism given the company's solid fourth quarter, encouraging forward guidance, and staggering growth potential.