Should You Invest in Shake Shack?

PHOTO CREDIT: Shake Shack

OVERVIEW

Shake Shack Incorporation is a company based in the United States. The company operates a chain of Shake Shack restaurants around the world. In these restaurants, the company makes some classic American food like burgers, fries, hot dogs, a selection of alcoholic and non-alcoholic beverages, and some other products. They operate over 275 restaurants all around the world. The company was founded in 2004.

Why You Should?

  1. Shake Shack has a great brand in the United States and in some markets around the world. This is one thing that really separates Shake Shack from the competition. The brand represents high-quality and good American food. This has benefited the company’s growth in the past and has also benefited investors in the company.
  2. Shake Shack is a great reopening play in an investor's portfolio. Shake Shack had to close or limit operations at most locations due to the COVID-19 pandemic. However, once people start getting vaccinated and as governments start relaxing regulation, customers will go back to Shake Shack locations around the world. This will help Shake Shack recover from this pandemic and will also benefit investors.
  3. Shake Shack will benefit from the COVID-19 stimulus. They can get some money from the government which will help their financial situation through these tough times. Furthermore, customers will have more disposable income and might spend it at a Shake Shack restaurant. This will benefit the company and will also benefit investors in the company.
  4. Due to the reasons mentioned above, the company has seen rising revenues and profits over the past couple of financial years. This has helped the company grow across all of its markets and has also helped the company build its financial position. The pandemic might end this stretch of revenue and profit growth but the company looks to return to growth in the future. In the financial year of 2019, the company reported revenues of around 594 million and profits of around 19 million. Both of these metrics are higher than what the company reported in the financial year of 2018 when they had revenues of around 459 million and profits of around 15 million.
PHOTO CREDIT: Yahoo Finance

Why You Should Not?

  1. Shake Shack faces tough competition from many large companies around the world. Small business competition as well as companies like McDonald’s, Yum Brands, Darden Restaurants, and many others compete with Shake Shack. This competition might hurt Shake Shack in the future and might also hurt investors in the company.
  2. The COVID-19 pandemic has decimated the demand for restaurant dining as people stay at home and governments regulate to prevent businesses from having in-store dining. This has hurt Shake Shack as they had to limit their operations and/or close some of their locations. This has hurt the company and has also hurt investors in the company.

MY OPINION

In my opinion, I think that Shake Shack is a decent long-term investment due to good brand recognition, a good reopening play, COVID-19 stimulus, and rising revenues and profits in the past. However, tough competition and impacts from the COVID-19 pandemic might hurt the company and its investors in the future.

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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.

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Aaditya Patel

Aaditya Patel

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

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