Market Overview

PreMarket Prep Stock Of The Day: Shake Shack

PreMarket Prep Stock Of The Day: Shake Shack

Benzinga's PreMarket Prep airs every morning from 8-9:00 a.m. EST. During that fast-paced highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to a recording, Benzinga will highlight a stock of the day that was featured on the show.

Stock Of The Day: Shake Shack

There are good days to report earnings and guidance when the market is ripping higher. There are bad days to report earnings and guidance when the market is under selling pressure. Then there are real bad days to report earnings and guidance all together.

For investors in Shake Shack (NYSE: SHAK), Tuesday happens to be one of those days.

Not Being Punished For EPS Numbers

Wall Street analysts played it close to the belt with their EPS estimates and some didn't have any at all. As a result, Shake Shack's EPS of 6 cents, which matched from the same quarter from last year, wasn't the primary catalyst for today's route.

When the Street doesn't have a good feel for where EPS should come in at, it will rely on other components of the report. The primary one being sales for the quarter, which came up shy of estimates ($151.4 million vs. $153.2 million).

The company also issued 2020 sales guidance of $712-$720 million, lower than the $737 million estimate. Another component of retail stores or restaurants is year-over-year sales comps, which were down 3.6%.

Fall From Grace And Rebound

After matching its all-time low from January 2016 ($30.00) in September 2017 ($30.12), Shake Shack didn't peak until September 2019 at $105.84.

When the Street began to shift to value stocks and abandon issues with high price-to-earnings ratios, it was nearly cut in half when it bottomed in December at $57.47.

From that low, it clawed its way back to $78.48 on Feb. 20 before pulling back ahead of the report.

Moving Forward From A Fundamental And Technical Perspective

From a fundamental perspective, this was the company's first EPS miss ever in its nearly five years as a public company. It was only its second sales miss over the same time period.

Therefore, investors need to determine whether or not this is a one-off or the start of a new trend.

From a technical perspective, the issue rebounded from its early morning low ($61.15), reaching $66.90 as of noon and is hanging on to a portion of those gains.

Ahead of its December low ($57.37), the issue did put in a series of 22 consecutive lows from Dec. 12-Jan. 14 at the $58-61.40 area.


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