Shake Shack shares opened for trade on January 30.
On Tuesday, Wall Street firms started rolling out their ratings on the burger chain, and Goldman Sachs started the company with a Neutral rating and a $US36 price target.
“We are initiating coverage of Shake Shack Inc. (SHAK) with a Neutral rating and see 13% downside to our $US36, 12-month price target (vs. average downside of 0.3% for our coverage universe),” Goldman writes. “Millennial relevancy, growing awareness outside of existing markets, and strong unit economics are all supportive of a significant runway for growth (only at 7% of its estimated US potential).”
Here are Goldman’s main drivers of growth for the company:
- Shake Shack is only at 7% of its estimated 450-store US capacity.
- Millennials love Shake Shack.
- The company’s pricing is strong against its peers.
- Growing Google searches in untapped markets is a positive indicator for growth potential.
- New stores offer a cash return of 32%, comparing favourably to peers.
- The brand is still in early stages of growth.
So, in short, Goldman thinks Shake Shack is a great company, but an expensive stock.
On Tuesday morning in pre-market trade, Shake Shack shares were little changed at $US41.75.