Should You Invest in Shake Shack?

OVERVIEW

Shake Shack Incorporation is a company based in the United States. The company operates a chain of fast-food restaurants around the world. In the company’s over 300 locations, it sells burgers, fries, custard, and many other American fast-food products. The company was founded in 2001.

Why You Should?

  1. Shake Shack is a great reopening play in an investor’s portfolio. The company had to shut down and limit operations at all of its locations due to the pandemic. However, once the pandemic is over, the company will see strong growth across all of its market segments as people go back out to eat at the company’s restaurants.
  2. Shake Shack has extremely strong brand recognition in the markets that it operates in. The company is known to serve delicious burgers and shakes to customers since its founding. The company has leveraged this strong brand in order to open up new locations and enter new markets around the world. This has also benefited investors in the company.
  3. Shake Shack has been aggressively expanding internationally. The company is starting to build up a presence in countries like Singapore, the UK, Saudi Arabia, and many others all have Shake Shack locations. If this international growth continues, the company can see some promising results in the future. This will also benefit investors.
  4. Unlike competitors like McDonald’s, Shake Shack still has many untapped markets domestically and internationally. Most of the company’s operations are on the East Coast, but the company has been expanding in states on the west coast and much of the midwest. These untapped markets will benefit the company and its investors.

Why You Should Not?

  1. The company faces tough competition in the restaurant industry. Some of these competitors include Chipotle, Domino’s, Starbucks, and McDonald’s. This competition might hurt the company and its investors in the future.
  2. Continued labor shortages might hurt the company’s ability to staff current and new locations. Drops in efficiency and productivity might also happen due to these shortages in workers. If this shortage continues, it might hurt the company’s results in the short to mid-term.
  3. New York City recently announced vaccine mandates for anyone who wants to go indoors and eat at restaurants (among other things). Now, I 100% support vaccines and it is the only way to end the pandemic. However, vaccine mandates might hurt demand at some of the company’s restaurants as you are shutting out hundreds of thousands of customers.

MY OPINION

I think that Shake Shack is a great long-term investment due to its position as a good reopening play, good brand recognition, international growth, as well as several promising but untapped markets for growth. However, tough competition, negative impacts from labor shortages, as well as some negative impacts from vaccine mandates might hurt the company and its investors in the future.

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Aaditya Patel

Aaditya Patel

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.