Shake Shack (NYSE:SHAK) Comeback Carries On With New Analyst Love

Back in the closing days of August, we took a look at Shake Shack (NYSE:SHAK), and found that its comeback from the dark days of COVID-19 was carrying on wonderfully. A little over a month later, we find that the company's comeback trail really hasn't hit any significant snags, and, better yet, a new analyst has come out in favor of the company.

Shaking Up the Business Model to Come Out Ahead

Back in the days before COVID, Shake Shack really wasn't considering issues like drive-through operations, curbside pickup, or even digital ordering. Why should it? People could do like they'd done for more than 50 years of fast-casual dining: walk in the door, go to the counter, place an order, pick it up, and go sit down in one of the chair/table setups provided. Then the government response to COVID kicked in, and sitting inside a building that wasn't your own home was off the table for the better part of two months, minimum.

Shake Shack, realizing it needed to change in order to actually have a functioning business, brought forth a range of new responses to the government's newly-minted demands, and the “digital experience” became a new and vital part of operations. The company had just hired a new vice president of digital experience back in December, and now, that concept was about to go from nice-to-have extra to the company's linchpin of operations.

Where no Shake Shack locations had curbside pickup options in March, now, nearly half—40%—of locations offer the service following a successful pilot program that helped standardize the methods of how to take food to a parked car. Some locations discovered that they really weren't in a position to offer it thanks to the layout of their parking and drive-through operations, especially given that most Shake Shack locations are operating in heavily-urban areas. But for those who can—by next year the number will increase to fully half—it will be in play soon. The company has also added curbside pickup options to its mobile app, which should help streamline processes even further.

The Analysts Respond to Shake Shack's Overtures

Over the last month, Shake Shack has gained a lot of ground with analysts. Our own research finds that, while it's still sitting at a consensus opinion of “hold”, it's recently picked up a whole new “buy” recommendation from Loop Capital, who started coverage of the stock just yesterday.

However, what's particularly noteworthy is the sheer number of hiked price targets on the company's stock. Seven such increases have taken place since May, with Deutsche Bank upping its target from $51 to $57, JPMorgan Chase & Co. going from $47 to $51, Jefferies Financial Group going from $45 to $50, Credit Suisse going from $48 to $52, Truist going from $51 to $58, and in the two moves that wreck the curve altogether, Piper Sandler's target went from $60 to $78 and Wedbush's target shot up from $53 to a whopping $77.

Not everyone, however, is so confident. MKM Partners, for example, dropped the target from $59 to $54, and Barclays pulled back from $60 to $49. Given that the stock is trading at $63.97 as of this writing, both appraisals look somewhat pessimistic.

Get Busy Growin' or Get Busy Dyin'.

Shake Shack has advanced steadily in the last several months, and the market has responded accordingly. In fact, Shake Shack recently revealed plans to open a location in Madison, Wisconsin; while the company isn't giving exact dates, the company's application for a liquor license suggests October 5 is the target date. This will be the company's second location in Wisconsin, and that represents a good sign for the company. It's going from being a “New York” place to being a nationwide interest, and spreading out tends to work well for companies looking to diversify their income. Just look at McDonald's (NYSE:MCD) or any of its fast-food equivalents.

The company has made rapid advancements over the last several months. With 800,000 new digital users, that's about all the proof anyone needs on that point. Throw in new methods of getting food to patrons and whole new markets being tapped, the end result is a whole new value, and a whole new reason to pick up Shake Shack shares. Sure, there's a certain danger in being regarded as “just another fast-food place,” but as more people get a chance to see Shake Shack's value, more people will likely be willing to put money behind that vision of value as well, driving share prices up and improving investor return.