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Shake Shack - AI Stock Analysis

Analysis generated May 14, 2024

Shake Shack Inc. (NYSE: SHAK) is a prominent player in the fast-casual dining industry, specializing in a menu centered around high-quality hamburgers, chicken sandwiches, hot dogs, crinkle-cut fries, frozen custard, and beverages. Founded in 2004, Shake Shack has grown from a single hot dog cart in New York City to a global brand with locations across multiple continents. The company's focus on fresh ingredients, innovative menu items, and a strong brand identity has bolstered its appeal among consumers and investors alike.

Fundamental Analysis

Revenue: For the most recent quarter, Shake Shack reported revenue of $290 million. This marks a 1.41% increase from the previous quarter, a modest but positive sign of growth. More significantly, it represents a 13.73% increase from the same quarter last year, underscoring sustained year-over-year growth.

Net Income: The company registered a net income of $2 million for the last quarter, a decrease of 71.76% compared to the previous quarter, raising a red flag. However, viewed year-over-year, the net income grew by an impressive 232.99%, indicating substantial improvement over last year's performance.

EBITDA: Shake Shack's EBITDA for the last quarter stood at $29 million, a sharp decrease of 68.61% from the previous quarter, which is cause for concern. Nevertheless, the EBITDA increased dramatically by 5,926.85% compared to the same quarter last year, suggesting a significant year-over-year turnaround.

Price-Earnings Ratio (P/E): The current P/E ratio is 181.19, which is notably high. Such a high P/E ratio could indicate that the stock is potentially overvalued, posing a bearish outlook.

Additionally, insider selling has been observed among company executives, which can often be interpreted as a bearish signal as it might imply a lack of confidence in the company's future performance.

Technical Analysis

Current Stock Price: Shake Shack's stock price currently stands at $104.71, an increase of 7.72% from a month ago, suggesting a positive short-term trend. Compared to the price a year ago, the stock has risen by 48.95%, highlighting a strong long-term trend.

Trend Analysis: Despite these gains, the overall trend appears bearish. The current Simple Moving Average (SMA10) is 104.27, which is lower than the previous SMA10 of 104.55, hinting at a possible decline in price movement. However, the Relative Strength Index (RSI) stands at 12.4, indicating an oversold condition, which may be bullish as it suggests the stock could be undervalued at present levels.

Alternative Data Analysis

Job Postings and Employee Sentiment: Shake Shack currently has 775 open positions according to popular job boards, a 62% increase over the last couple of months. This surge in hiring could indicate the company's plans for growth and expansion—a healthy sign. Employee sentiment is neutral, suggesting neither overly positive nor negative feelings among the workforce.

Customer Acquisition: The company's website garners an estimated 2.2 million visitors monthly, with little change observed in recent months. This indicates stable online interest. However, the daily number of mobile app downloads has decreased by 50%, which is concerning as it might indicate a potential loss in mobile customer engagement.

Customer Engagement: Shake Shack’s social media presence features 850,000 Instagram followers and 96,000 Twitter followers, with no significant changes in numbers recently, indicating stable but stagnant customer engagement on these platforms.

AI Prediction: According to AltIndex's AI score, which combines fundamental, technical, and alternative data analysis, Shake Shack has an AI score of 71. This is interpreted as a buy signal.

Conclusion and Recommendation

In summary, Shake Shack showcases both strengths and areas of concern. The strong year-over-year increases in revenue, net income, and EBITDA are notable, despite quarter-over-quarter declines in net income and EBITDA. The high P/E ratio and insider selling suggest potential overvaluation and bearish undertones. Technically, the stock has shown robust short-term and long-term performance, although the moving averages indicate possible downward momentum. Alternative data reveals an expansionary posture in hiring but mixed signals in customer acquisition and engagement metrics.

Given the mixed indicators, our recommendation is cautious optimism. The high P/E ratio demands scrutiny, yet the AI score of 71, improved fundamentals year-over-year, and expansion plans indicate potential for future growth. For investors with a tolerance for higher risk and the ability to monitor the stock closely, Shake Shack may offer rewarding opportunities. However, a conservative approach is advised due to the concerns highlighted in the short-term performance metrics and insider activity.