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Josh Brown On Why Shake Shack Is A Good Long-Term Buy

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Josh Brown On Why Shake Shack Is A Good Long-Term Buy

Owning shares of burger chain Shake Shack Inc (NYSE: SHAK) makes sense for long-term investors who accept the notion that the stock "isn't going to work until we get a return to work," CNBC "Halftime Report" regular Josh Brown said on Tuesday.

Pivoting The Business: Shake Shack's management deserves credit for taking some of the necessary steps needed to address rapidly changing consumer demand, the CEO of Ritholtz Wealth Management said.

Some of those changes include adding drive-thru capabilities at restaurants and investing in digital technology.

It will take time for Shake Shack to fully transition, but time may be on its side, he said.

The shifts from the COVID-19 pandemic are likely here to stay for a while, making Shake Shack a stock to hold for patient investors, Brown said. 

"The stock is going to work long-term, but you should not expect it to act as well as the pizza chains." 

Moving Past Shake Shack's 'Catastrophic' Q2: Shake Shack reported "catastrophic" second-quarter performance, as revenue fell nearly 40% year-over-year and same-restaurant sales were down 49%, Brown said. 

The reason for the poor performance is Shake Shack's large exposure to tourist regions, especially New York City, the Ritholtz CEO said.

The company is opening new units worldwide specifically designed for the COVID-19 era, with drive-thru lanes and walk-up windows.

The strategy ensures that Shake Shack will "never again be beholden" to one specific region, Brown said. 

"I think they are doing all the right things — it just takes time for the results to show."

Once tourism ultimately returns to prior levels, Shake Shack's stock could return to its prior $90 level, he said. 

SHAK Price Action: Shake Shack shares were up 0.82% at $53.05 at last check Wednesday.

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Benzinga file photo by Dustin Blitchok. 

 

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