Shake Shack's Agreement With Activist Investor Alleviates Concern, Says Analyst

Shares of Shake Shack Inc SHAK spiked in early trading on Friday, just days after the company inked a cooperation agreement with activist shareholder Engaged Capital, LLC.

The agreement holds the potential for operational and cost changes and will foster greater accountability, according to Morgan Stanley.

The Shake Shack Analyst: Brian Harbour upgraded the rating for Shake Shack from Underweight to Equal-Weight, while raising the price from $52 to $63.

The Shake Shack Thesis: The agreement with Engaged Capital was driven by some of Shake Shack’s fundamental concerns, “mainly related to operations and profit visibility,” Harbour said in the upgrade note.

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“The company to its credit has recently signalled more of an intention to focus on these elements of its business model, with bullish margin targets laid out for 2023, driving the stock higher post earnings and alleviating some investor concerns,” the analyst wrote.

“What's added here is that there now appears to be improved accountability to the board for making changes and more incentive to do so,” he added.

SHAK Price Action: Shares of Shake Shack had risen by 0.49% to $67 at the time of publication Friday.

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Photo: Shake Shack