Professor Elam

Tuesday July 4, 2017

Shake Shack deubted at $21 and rose to $92.

There are a mere 84 USA locations and another dozen outside the USA.

Here is a textbook story of social mood.  The IPO was officially priced at $21 but jumped to $50 the first day of trading. For a company with a few dozen locations this is an example of extreme positive social mood. The positive mood boosted the stock price all the way to $95 in a mere four months. Understand these burgers carry high double digit price tags.

 The market cap is a mind boggling $1.28 billion dollars.

Even today at $35.07, the price earnings multiple is a whopping 65 to 1!

All employees must spend three days in an actual restaurant. The new CFO Tara Comonte did just that. But frankly reading this article, I am puzzled that Tara left giant Getty Images for a tiny niche hamburger chain.  IN her own words

Ms. Comonte said her focus at Shake Shack is to leverage the use of technology to connect with customers as the company continues to grow. Shake Shack launched its mobile app earlier this year allowing customers to skip the physical line.

My analysis is that positive social mood has driven stock prices, housing prices, and yes hambburger prices to levels not previously seen.The same thing has happened in various tech booms in Austin, just up the road.At those times one reads of $12 lunch cocktails and such.But of course that never lasts.

I suspect Tara would do better not worrying about an app but worrying about how to downscale the menu when markets eventually cool.

And really does this look like a burger and fries gal to you?
It is interesting to see that much much more is expected from today's CFO than just producing the financial statements.

Here is a comment on the Shake Shack Burger from an article on the Top Ten Burger Chains.

America’s best fast-food burger is Shake Shack. Yes, it’s better than In-N-Out, and yes, it has its own secret menu… kind of (it’s called Danny Meyer’s hospitality philosophy). What started as a hot dog cart in Madison Square Park in 2001 has made history. In 2004, restaurateur Danny Meyer’s Union Square Hospitality Group won the bid to open a permanent kiosk in the park, and the lines, buzz, cult following, and even a begrudging review from The New York Times followed. Why is it so good? Quality. And one of the juiciest cheeseburgers (100 percent all-natural Angus beef, no hormones, no antibiotics) you’ll ever find on a soft, grilled potato roll (ask for pickles and onions!). Shake Shack’s vigorous expansion program — Theatre District, Coral Gables, Abu Dhabi, and now, Las Vegas, means that next year, and for the first time ever, there will be a Shake Shack and an In-N-Out in the same city, setting up a showdown that has been in the works for fans of both chains as their devotees, and word about both burger joints has spread. Place your bets….