Following earnings is it time to buy a well-done sell-off in Shake Shack (NYSE:SHAK)? Let’s take a look at what exactly is happening off and on the SHAK stock price chart to allow for a stronger risk-adjusted determination.
This week’s been marked by some ugly sessions for SHAK stock. In a nutshell, mixed quarterly results and a side order of costly ‘customer experience’ store upgrades and temporary closures next year had Wall Street heading for the exits. But was Shake Shack stock’s single-largest price shellacking of 21% deserved?
By the numbers, the burger chain delivered a 10-cent profit topper on earnings of 31 cents per share of SHAK stock. The significant 47% bottom-line beat also came in well-above last year’s Q3 EPS of 17 cents.
The sales picture came in a bit more mixed. Revenue of $157.8 million did eke out a beat of consensus views pegged at $156.9 million. And sales compared to 2018’s rake of $119.6 million certainly looked smart. But that’s not the entire story.
Investors selling and an analyst community, by and large, trimming price targets on SHAK stock appear to have been motivated by a couple other troubling factors and trends.
Same-store-sales rose 2%, but failed to meet Street forecasts of 2.7%. Some analysts taking their cue from management’s prior quarterly release blamed the miss on “volatility” tied to making Grubhub (NYSE:GRUB) Shake Shack’s exclusive delivery service. Further, unit-level margin of 23.1% also came up short of analyst views of 24.3%.
Lastly, with management trimming its same-store sales full-year outlook from 2% to 1.5% and bumping its revenue guidance but still falling short of analyst views of $600 million by roughly 0.08%, investors had enough ingredients to place an order for near-term pain over long-term promise.
SHAK Stock Price Monthly Chart
If misery loves company SHAK stock investors are far from alone this earnings season. In fact burger giant McDonald’s (NYSE:MCD) stock and GRUB shares have also both taken it on the chin following their quarterly confessionals. More important, is Shake Shack now in position for investors to buy stronger value on the price chart? I don’t believe SHAK stock price is there yet.
Looking at the monthly price chart, shares of SHAK have broken their 50% Fibonacci retracement level and roughly 6% from challenging the 62% line. Zone testing like this can and often does lead to bottoms with requiring a picture perfect touch of support. But in this case that’s unlikely to happen.
With SHAK’s stochastics rolling over from an overbought condition — and monthly Bollinger Band failing to back up a buy decision inside the zone — there’s a certain lack of evidence promoting a low in shares is nearby. My interpretation is Shake Shack stock could easily makes its way toward $50.
Bottom line seems that the $50 area is where the 76% level, an angular support line and an appealing whole number come into play. There’s also the possibility a rising, but currently removed from the action lower Bollinger Band could act as an additional support. Net, net there’s still plenty of time and dollars to go before the proverbial dinner bell will be ringing loudly for SHAK bulls to take notice.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. . For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.