Editors Note:

This new arrival on the restaurant scene is losing its luster. Eight insiders sold $30 million in shares last week and full year earnings guidance was weak. Time to dump the SHAK?


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SHAK - Shake Shack - Company Description

Shake Shack owns, operates and licenses Shake Shack restaurants in the U.S. and internationally. The currently operate more than 50 domestic stores and 30 international stores. The stock started off with a bang because the majority of their stores in early 2015 were in the Northeast and traders and investors were familiar with the brand. Shares rocketed to a market cap of about $2 billion despite only having about 50 stores at the time.

After topping out at $97 in May of 2015 shares have fallen to just over $30. The bloom is off the rose and the brand has become just another hamburger stand with plenty of competition from stores like Five Guys, an improved McDonalds, an aggressive Burger King, Jack in the Box with its Qdoba Mexican unit, Good Times, Wendy's, etc.

The reported earnings in early March and shares dropped -17% even though they beat earnings and revenue estimates. The problem came from guidance. They forecast same store sales for all of 2016 of 2.5% to 3.0% growth compared to 13.3% growth in 2015. Analysts have lost the love for the SHAK. There are ten analysts that follow the stock. Only one has a buy rating, 7 have hold ratings and 2 have sell ratings. The consensus price target has declined to about $35, which is where it is trading now.

Even worse eight insiders combined to sell more than $30 million in shares last week with officers and directors dumping a lot of their shares. With a PE of -52 the stock is not growing its fundamentals.

Earnings May 12th.

Buy the May $32.50 put, currently $2.65, initial stop loss $36.75.