New Coverage Stirs Up Shake Shack Stock

There's pessimism abound that can fuel tailwinds for SHAK

Assistant Editor
Oct 2, 2020 at 10:28 AM
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Shake Shack Inc (NYSE:SHAK) received a brand-new bull note today, as Loop Capital initiated coverage with a "buy" rating and $78 price target. The firm cited the roadside burger stand's "brand transformation," as well as its successful transition to off-premise and digital within social distancing measures. The shares have oscillated between the red and black various times already, currently up 1.5% at $65.85 at last check --earlier dropping to $63.77 amid today's broader-market selloff. 

On the charts, SHAK has spent the last few weeks trading sideways after being rejected by the $72 level earlier in September. There's support in place at the shares' 40-day moving average though, and its worth noting that SHAK has more than doubled off its March 17 all-time lows at $30.  

Coming into today, 10 of the 15 in coverage analysts sported a hesitant "hold" rating on the stock, with three a "strong buy" and two a "strong sell." Meanwhile, the 12-month consensus price target of $56.08 is a 13.6% discount to last night's close, meaning a round of price-target hikes could be on the way. It's a similar mood among short sellers; 22.6% of SHAK's total available float is sold short, or almost six days' worth of pent-up buying power.

The options pits are looking much more bearish than usual as well. This is per SHAK's 10-day put/call volume ratio of 1.51 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 90% of readings from the past year, indicating a greater-than-usual appetite for put options amid traders. 

Lastly, options look like a good way to go when weighing in on Shake Shack stock's next move. SHAK's Schaeffer's Volatility Index (SVI) of 56% stands in the 16th percentile of its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 

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