Shake Shack stock is enjoying a boost this afternoon, following a bull note out of Piper Sandler. The analyst initiated coverage with an “overweight” recommendation, citing an expectation that the limited restaurant service sector will continue to take share from full-service peers. At last glance, SHAK is up 2.9% at $72.16, earlier touching a 15-month peak of $72.85. Year-to-date, the fast-food chain has added over 75%, with long-term support appearing at the 120-day moving average. Even more fresh highs could be on the horizon, per historical data.
In fact, while it sits at a fresh 15-month high, SHAK is also seeing historically low implied volatility (IV), which has been a bullish combination in the past. Data from Senior Quantitative Analyst Rocky White shows three other signals during the last five years when the security was trading within 2% of its 52-week high, while its Schaeffer’s Volatility Index (SVI) sat in the 20th percentile of its annual range or lower. This is currently the case with SHAK’s SVI of 33%, which sits in the lowest percentile of its annual range. One month after these signals, the stock was higher 100% of the time, averaging an 18% return.
Shake Shack stock is looking ripe for even more upgrades and/or price target hikes. Heading into Wednesday, nine of the 14 covering brokerage firms sport a “hold” or “strong sell” rating, and the security’s average 12-month price target of $69.73 comes in at a discount to current levels.
Shorts look to be getting rid of their bearish bets already. During the last two reporting periods short interest has backpedaled more than 30%, though it still accounts for 6.9% of the stock’s total available float. At the equity’s average pace of daily trading, it would take shorts just over three days to buy back these bearish bets.
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