Shares of restaurant chain Shake Shack(NYSE: SHAK) were rising on Wednesday after it reported its financial results for the third quarter of 2024. Investors celebrated after digesting the numbers: As of noon ET, Shake Shack stock was up almost 14%, within 1% of the all-time high that it reached back in early 2021.
Business is good for Shake Shack
In Q3, Shake Shack's revenue was up nearly 15% year over year to $317 million. Opening 17 new locations during the quarter helped boost the top line. But revenue was further boosted by same-store-sales growth of over 4% -- the ninth straight quarter same-store sales have gone up.
Shake Shack has been making progress on profitability in recent quarters, particularly with its restaurant-level operating margin. In Q3, the company's restaurant-level operating margin of 21% exceeded management's guidance, which was an encouraging sign.
Same-store-sales growth and operating margin improvements were encouraging enough. But these improvements are also an excellent sign when looking ahead, which is why Shake Shack stock rose so much today.
Is the long-term outlook looking up?
Shake Shack's management raised the lower end of its financial guidance for 2024, which is good news for shareholders -- it means business is good. But investors really like how 2025 is shaping up. Management expects to open up to 85 new locations next year, compared with just 75 this year. That's really fast growth for a company with 552 locations as of Q3.
Moreover, Shake Shack's management is looking for ways to save money on pre-opening expenses, as well as improve unit economics for stores once they're open. In other words, growth is picking up, and management seems to be taking profits more seriously than it has in the past.
With moves like this, I understand why Shake Shack investors were quite upbeat after reading the Q3 report.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,492!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,204!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $409,559!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of October 28, 2024
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
