Shake Shack (NYSE:SHAK) was lifted to Strong Buy from Outperform at Raymond James on Wednesday, with analysts maintaining a $78 per share price target on the stock.
Analysts said in a research note that they see margin and ROI improvements for the company, and there is upside for the stock into 2024.
"We are upgrading SHAK to Strong Buy from Outperform as we 1) believe the company is still in the early innings of driving improved margins and lowering development costs and 2) see idiosyncratic opportunities into 2024 to increase margins and potentially stimulate traffic, which could create upside to consensus 2024 expectations (currently modeling EBITDA margins up only 30 bp)," wrote the analysts.
"With only ~300 Co. owned U.S. units and ~180 Int’l. units, we believe there is a significant opportunity to create long-term shareholder value, assuming initiatives to improve new unit ROIs continue to gain traction," they added.
Analysts also noted that improved demand trends in October have held up relatively well through November, although they are mindful of more difficult compares over the next few months. In addition, analysts said SHAK management seemed quite confident in its ability to drive higher margins in 2024.