Shake Shack (NYSE:SHAK) stock has been on a roller coaster ride in 2020.

Early on in the year, SHAK stock was riding high on optimism that the burger chain’s 2019 delivery headwinds would turn into tailwinds driven by marketing synergies with Grubhub (NYSE:GRUB). At the same time, menu innovation and international expansion tailwinds were to set to kick in.

Then the novel coronavirus hit. The global economy shut down. Shake Shack’s stores closed. SHAK stock fell off a cliff. From $75 to $30.

Since then, SHAK stock has rebounded. From $30 to $50. The global economy has gradually reopened, Covid-19 hysteria has faded and consumer activity has normalized.

Time for another huge selloff? Or another big rally?

Neither.

Instead, the wild roller coaster ride in Shake Shack stock may finally be over. Going forward, gradual improvements in the fundamentals should keep shares on a steady uptrend. But valuation friction ultimately limits how much higher shares can go in 2020.

Here’s a deeper look.

The Fundamentals Will Improve

The fundamentals underlying SHAK stock will gradually and consistently improve over the next few months.

This improvement has already materialized as economic activity has recovered following mass shutdowns in March. Shake Shack’s comparable sales trends have improved from down 64% in April, to down 42% in May, to down 39% in June (excluding the impacts of protests). At the same time, the company’s stores have gone from $32,000 in average weekly sales in April, to $50,000 in May, to $52,000 in June.

These trends will improve over the next several months.

Spearheading the improvement will be Shake Shack’s core New York City market. NYC is the company’s largest and most important market. Yet, in the last week of June, NYC comparable sales for Shake Shack dropped 58% year-over-year — making it the burger chain’s worst performing geography, by far.

This is partly because of extra Covid-19 caution on behalf of NYC residents relative to consumers elsewhere. While this extra caution has made for a slower economic recovery, it also lays the groundwork for an accelerated and relatively friction-less recovery in the back half of 2020.

That’s because, while many other parts of America are dealing with spiking Covid-19 cases and are rolling back reopening measures, New York City’s Covid-19 trends (from new cases to positivity rates to new deaths) remain highly favorable, and the city — and its people — continue to get back to normal.

So long as this remains true, Shake Shack’s core NYC business will steadily improve in Q3 and Q4. I suspect business elsewhere will improve, too, because U.S. consumers appear to ready to embrace a “we have to live with it” mentality.

Shake Shack’s comparable sales, traffic, revenue and profit trends will all improve in the second half of 2020. Such improvements should allow for continued strength in SHAK stock.

Shake Shack Stock Has Valuation Limitations

While improving fundamentals will guide SHAK stock higher in the second half of 2020, the magnitude of upside will be limited by what is already a stretched valuation on the burger chain.

Back in early April — when I said it was time to buy the dip in SHAK stock — I claimed that Covid-19 did not materially alter Shake Shack’s long-term growth trajectory. I believed that the company still had the potential to scale to 1,000-plus locations over the next decade and roar to a $5-billion-plus valuation.

Nothing about that long-term growth narrative has changed since April. Shake Shack is still a hyper-growth burger chain that will likely be a $5-billion-plus company by 2029.

But, if you discount a future valuation of $5 billion back by 10% per year, you arrive at a 2020 valuation of $2.1 billion.

That’s only a hair above the current market capitalization of $2 billion.

As such, near-term upside in SHAK stock is limited by valuation friction.

Bottom Line on SHAK Stock

The best of the 2020 rally in SHAK stock has already happened.

Going forward, consumer behavior normalization will continue to drive fundamental improvements for Shake Shack, which will help sustain current strength in SHAK stock. But don’t expect this stock to rally another 80%, or even 50% or 20% from here.

Rather, it seems more likely that Shake Shack stock will be limited to sub-10% gains into the end of the 2020.

That doesn’t make SHAK stock a bad investment. It’s still a great long-term investment. But investors can afford to wait for better prices than $50 to buy into the long-term growth story.