RBC says this fast casual stock down 50% from its highs is set to rise
Sitting more than 50% off from its July 2025 highs, RBC Capital Markets thinks Shake Shack may be at an inflection point and ripe for a turnaround in its stock. The bank initiated coverage of the fast casual chain with an outperform rating and a price target of $89. That represents a 28% gain from Friday’s close. Analyst Logan Reich in a Tuesday note said that the stock was at an inflection point. “Increasing scale and sophistication in marketing and supply chain can drive upside to Street estimates through at least 2027,” he wrote in the note. “The new CFO doing away with quarterly guidance and potentially setting more conservative expectations could yield more consistent quarterly beats.” That stronger marketing strategy, Reich said, will drive same-store sales growth acceleration. RBC is modeling for 3.1% growth in 2027, while Wall Street’s consensus is 2.2%. He is also forecasting stronger margins in 2027 and 2028 for the company, primarily due to lower beef prices. Reich added that if beef prices remain at their current levels off their late June highs through 2027, beef inflation will decelerate to flat or into negative territory by the second quarter of that year. It all sets up Shake Shack for multiple expansion, where Reich said the stock’s valuation is historically low. SHAK 1Y mountain Shake Shack 1-year. “The stock is trading at 11x EV/Street’s 2027 EBITDA estimate, which is near the historical trough,” he wrote. “Our $89 PT is based on 14.5x EV/FY27E EBITDA vs. fast casual peers at high-teens, where we think expansion will be driven by upside to estimates and the story becoming cleaner.” Analysts covering Shake Shack are split on the stock. Of the 28 who cover it, 15 rate it a buy or strong buy, according to LSEG.
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