Shares of Shake Shack Are Getting Their Brains Blown Out in the After-Hours, Post Heinous Earnings

Shares of SHAK are getting their brains blown out–thanks in large part to patrons not really giving a shit about their hammed burgers. The stock has been running up lately and has now bequeathed said gains back into the matrix of the market, from which it came.

The blood is flowing heavily after the company reported a 37% jump in revenues and earnings of 0.14 cents per share.  The gist of the report lies in the fact that same store sales climbed by just 4.5%, which was much worse than the 5.4% expected. Granted, these numbers are gargantuan erections, when compared to the flaccid -30% pin action at Chipotle. Nonetheless, investors expected MOAR.

In addition, the company raised guidance to $253-256m for 2016, from 251m.

“Domestically, given favorable development tailwinds in our 2016 pipeline, we have increased guidance to open 18 domestic company-operated Shacks this year,” CEO Randy Garutti said. “Next week we will reach a milestone of our 100th Shack opening worldwide. We have never been more excited about the opportunities ahead of us and are committed to investing in our team as we envision and execute the next 100 great Shacks.”

All very nice and wonderful sentiments, but the stock is heading lower by double digits now, so shut the fuck up.

As of now, the company is operating under the finance to grow model. The core issue with this narrative is same store sales plunging to just 4.5%, compared to the +12.9% it enjoyed just 52 weeks ago.

At 7x sales, SHAK is at the very top of the restaurant valuation pecking order, second only to WING, which trades at 9x. This is the polar opposite to the YELP quarter, which smashed estimates and was catapulted off low valuations. This disappointment from high valuations will lead the shares to ruin.

It’s a sell.

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