Shake Shack Stock Heats Up Following ICR Presentation, Bullish Goldman Comments

Goldman Sachs analysts attended Shake Shack Inc's SHAK presentation at the ICR Conference and left "with more comfort" across several key areas of investor debate.

The Shake Shack Analyst

Katherine Fogertey maintains a Buy rating on Shake Shack's stock with a $115 price target.

The Shake Shack Thesis

Shake Shack kicked off a delivery partnership with GrubHub Inc GRUB in mid-November before switching to an exclusive partnership, Fogertey said in a Tuesday note. (See her track record here.)

During Shake Shack's presentation at the conference, execs said the company recently completed the point-of-sale integration of GrubHub, but so far only 40% of Shake Shack locations have migrated to GrubHub as their sole delivery provider, the analyst said.

Wall Street estimates assume a "high level of disruption" as the company finishes the transition, Fogertey said. But the company's presentation makes the case the disruption is "more manageable than feared," she said.

Elsewhere, Shake Shack's menu offering for 2020 looks strong, including the addition of old favorites like the hot chicken sandwich, the analyst said.

Some investors expressed concerns that chicken nuggets would be removed from the menu due to operational complexity and costs, but they're staying on, according to Goldman Sachs.

Shake Shack's commentary suggests nuggets will be a permanent menu item, signaling the restaurant chain "made progress" in figuring out the economics around the item, Fogertey said.

The Veggie Shackburger is being tested in New York and could expand to other limited test markets this year, the analyst said.