Shake Shack Stock Is Downgraded. Investors Are ‘Too Hopeful.’

Shake Shack reported a 4.6% decline in foot traffic in the first quarter of 2025, citing “unfavorable weather and broader industry pressures.” (Scott Olson/Getty Images)

Shake Shack stock slipped on Thursday after Jefferies downgraded shares of the hamburger chain and advised investors to reduce their expectations.

Analysts led by Andy Barish cut their rating on Shake Shack to Underperform from Hold, but raised their price target on the shares to $120 from $100. They raised their forecasts for earnings before interest, taxes, depreciation, and amortization.

“We view investor expectations as too hopeful in the context of valuations that are already near/above historical instances of re-rating,” Jefferies wrote.

Shake Shack didn’t immediately respond to a request for comment.

The firm cited Wall Street estimates that call for Shake Shack to achieve adjusted Ebitda growth in the mid-teens percentage range annually through 2028. Management has forecast growth in the low-to-mid-teens.

The analysts argued that hopes for same-store sales to rebound in the second half of the fiscal year are already reflected in Shake Shack’s valuation, and that any further acceleration is “likely limited.”

On a call to discuss the chain’s earnings in May, executives said a 4.6% decline in foot traffic triggered by “unfavorable weather and broader industry pressures” hurt same-store sales.

Inflation also remains an issue for Shake Shake and its peers. Jefferies cited the rising price of beef, saying that together with competition from other fast-casual chains such as Cava and Wingstop, it “may limit upside.”

Shares dipped 1.4% to $134.93 on Thursday, its longest losing streak since a seven-day stretch in March, according to Dow Jones Market Data. The S&P 500 climbed 0.5%.

Recent menu changes have been a lure for customers, including the additions of the Dubai Chocolate Shake, fried pickles, and expanded summer barbecue offerings. The company also has intensified its drive-through focus, launching new combo menus in certain locations with plans to add them to all drive-throughs by the end of the second quarter.

While all that may warrant some optimism, huge positive developments in sales are needed to improve sentiment, Jefferies said. The analysts aren’t holding their breath, saying Shake Shack has less growth potential than its competitors.

The company is set to report second-quarter earnings before the market opens on July 31.

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