Why this restaurant’s stock price soared
One of the biggest moves on Thursday was a fast food chain. Shake Shack (NYSE:SHAK) surged about 24% on the day. At one point, the stock hit a 52-week high of more than $98 per share, and as of Thursday afternoon was trading around $97 per share.
The catalyst was the company’s impressive fourth-quarter results beating consensus estimates and prospects for strong growth in 2024. Let’s take a look.
Dozens of new Shake Shacks
Shake Shack opened 44 new company-operated restaurants and 41 new licensed Shake Shack stores in 2023. In the fourth quarter alone, we opened 15 company-operated restaurants and 9 licensed Shake Shack locations. We currently have over 500 branches worldwide and plan to have more in 2024.
In the fourth quarter, Shake Shack’s sales rose 20% to $286 million and net income was $6.8 million, or 17 cents per share. This is up from a net loss of $8.1 million, or 20 cents per share, in the fourth quarter of 2022. For the full year, Shake Shack’s sales rose 21% to $1.1 billion and net income was $20.6 million, or 50 cents per share. This is up from a net loss of $23 million in 2022.
Operating profit, which is revenue minus restaurant-level operating expenses, was $54.6 million in the quarter, up from $43.7 million in the year-ago fourth quarter. Operating profit margin increased from 19.8% to 19.8%. For the full year, the chain’s operating profit increased 37% year-over-year to $208.2 million, with its 2023 operating margin increasing to 19.9% from 17.5% in 2022.
“We ended the year on a strong note with positive traffic in the fourth quarter, driven by the success of our sales-led strategy and continued margin expansion,” Shake Shack CEO Randy Garutti said in the earnings call. Yes. “Our leadership team is energized and excited as we launch our strategic priorities for 2024 and aim for another year of strong growth and margin expansion.”
Just getting started
Although fourth-quarter results were solid, Shake Shack’s 2024 outlook may have been the main catalyst for Thursday’s surge. The company is targeting 2024 revenue of $1.21 billion to $1.25 billion, which would be a 10% to 14% increase over 2023. Shake Shack also estimated same-store sales growth in the low single digits, compared to 4.4% in 2024. 2023.
Additionally, Shake Shack’s general and administrative expenses are expected to increase from $129.5 million to $139 million to $142 million in 2023, although strong growth in adjusted EBITDA is expected. Shake Shack is targeting adjusted EBITDA of $160 million to $170 million this year, up 21 to 29 percent from last year. Restaurant-level operating profit margin is expected to rise slightly from 19.9% to 20-21% in 2023.
Finally, the number of new Shack openings is expected to be slightly lower than in 2023, with 40 new company-operated locations and 40 new licensed locations planned for this year.
“In many ways, we feel we are just getting started,” Chief Financial Officer Katie Fogerty said in a letter to shareholders. “In 2024, we plan to improve the overall customer experience, drive sales, lower total cost of service, further optimize our workforce, demonstrate improvements in the way we build and open Shacks, and make significant investments in our team. no see.”
Shake Shack’s stock price has surged about 78% in 2023, and Thursday’s surge already puts it up more than 30% in 2024. The company’s prospects are solid, but it’s questionable whether its earnings will be enough to justify its high valuation. Especially after this. spike. Now might not be the right time to jump into this stock, as things may be stabilizing somewhat. However, it is worth noting and watching that the valuation may decline slightly.
