Shake Shack Sizzled; Wall Street Expects T-Mobile/Sprint Deal to Fizzle

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In this segment of the Motley Fool Money podcast, host Chris Hill is joined by Fool analysts Jason Moser, Andy Cross, and Ron Gross to consider the progress of Shake Shack (NYSE: SHAK), which is making headway in its multiyear expansion plan. First-quarter revenue was up 29%, and more importantly, same-Shack sales were up 1.7%, and share prices shot upward in response. Even so, at least one Fool says the stock is still not for him.

In other news, after a week, shares of T-Mobile (NASDAQ: TMUS) and Sprint (NYSE: S) are lower than they were before they announced a merger deal. The Fools discuss the likelihood of the plan making it past regulators and shareholders to closing, and consider whether it would be a win or a loss for customers.

A full transcript follows the video.

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This video was recorded on May 4, 2018.

Chris Hill: Let's move on to Shake Shack. First quarter profits came in higher than expected. The burger chain also raised guidance for the full fiscal year, and the stock was up 23% on Friday, Ron.

Ron Gross: Oof, man, I don't know. You know, I still don't get the valuation here, but you can't argue with solid results. Revenue up 29%, beating estimates. Get this: same-shack sales, not same-store sales, same-shack sales were up 1.7%. You have adjusted pro forma net income, after you adjust for some wonky things, up 54%. Amazing. Guidance was good. They're building toward 200 domestic company-operated shacks by the end of 2020. Their long-term target is 450. They're at about 100 now. So, theoretically, the growth rate is there to support this valuation, which is in excess of 25X EBITDA. It's not an investment for me. I've actually never been in one, but they're building one around the corner from my house, so stay tuned. [laughs] So, great results, stock is not for me.

Hill: You know what? If Zillow can have the Zestimate, they can have same-shack sales. This past week kicked off with merger Monday living up to its name. T-Mobile announced it's buying Sprint for $26 billion in stock. This is the third time the two companies have attempted to get together. Jason, both stocks down this week. Wall Street does not think this deal is going through.