Shake Shack (SHAK, Financials) shares rose 3% in pre-market trading on April 1 after Loop Capital upgraded the stock to Buy from Hold, citing a 44% upside potential based on a $127 price target.

The new rating was issued by Loop Capital analyst Alton Stump, who said the fast-casual burger chain could deliver adjusted earnings before interest, taxes, depreciation and amortization above its 2025 guidance. According to Stump, the company's comparable-store sales could exceed expectations throughout the current year.

Stump published a previous note outlining Shake Shack's potential, but since then, the stock has declined about 25%. That drop, he said, has created what he called a compelling entry point for investors.

“The shares of SHAK pulled back over 25% since our report was published two months ago, which we believe has created an attractive buying opportunity for investors,” Stump said, according to the note published Monday by Loop Capital.

Shake Shack operates over 500 locations globally and has been attempting to improve operating margins amid higher input costs and macroeconomic pressure. Loop Capital's outlook comes as the company navigates increased competition in the fast-casual space and investor scrutiny on unit economics and store expansion strategy.

The upgrade may influence broader sentiment around the stock ahead of Shake Shack's next earnings release. Loop Capital's valuation implies confidence in the company's ability to execute on its strategy and drive profitability.

Shake Shack closed at $88.24 on March 31. At $127, the Loop Capital target represents a roughly 44% premium to that level.