What Happened?

Shares of fast-food chain Shake Shack (SHAK) fell 8.1% in the afternoon session after the company reported underwhelming preliminary sales outlook for Q4 2024, barely surpassing Wall Street's expectations. However, EBITDA beat by a more convincing margin. Projections for FY2025 showed sales growth of 16%–18% year-on-year and adjusted EBITDA growth of 14%–20%, both roughly aligning with consensus estimates. However, the company's three-year financial forecast raised concerns, signaling a sharp slowdown in growth. Notably, SHAK anticipates revenue growth in the low teens and adjusted EBITDA, rising only in the low to mid-teens range. Markets typically reward companies that deliver strong earnings beats and raise future guidance. Given the company's weak growth outlook, these results point to tougher times ahead. 

What The Market Is Telling Us

Shake Shack’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 11 months ago when the stock gained 26.5% on the news that the company reported fourth-quarter results that beat across the board on all key metrics from sale-store sales to revenue to profits to EPS. FCF even came in higher than expected and was positive rather than the loss projected by Wall Street analysts. Zooming out, this was a fantastic quarter that should have shareholders cheering.

Shake Shack is down 9.8% since the beginning of the year, and at $120.18 per share, it is trading 13.4% below its 52-week high of $138.76 from December 2024. Investors who bought $1,000 worth of Shake Shack’s shares 5 years ago would now be looking at an investment worth $1,993. 

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