Morgan Stanley analysts are out with research notes on burger chain Shake Shack Inc (NYSE:SHAK) and department-store firm Nordstrom, Inc. (NYSE:JWN), retaining their cautious stance on the stocks following yesterday’s earnings announcements.
Shake Shack Inc
Morgan Stanley’s John Glass reiterated an Underweight rating on shares of Shake Shack, with a price target of $39, despite solid first-quarter earnings that topped expectations across the board. Shake Shack had $0.08 in EPS on $54 million in revenue, compared to consensus estimates of $0.05 in EPS on $52.06 million in revenue.
Glass commented, “Given the very challenging yr ago compares, and heavier reliance on traffic this year than in the past (check, at least as we understand it now, will not be as big of a driver), that convergence may well happen later this year. Understanding that growth stock multiples and comp momentum are highly correlated, we still think some caution is warranted until the amount of comp momentum deceleration is better understood. Other key metrics–store openings, new store productivity, margins,etc., all remain strong in our view.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst John Glass has a yearly average return of 8.5% and a 59.5% success rate. Glass has an 28.8% average return when recommending SHAK, and is ranked #571 out of 3913 analysts.
Out of the 9 analysts polled by TipRanks, 2 rate Shake Shack Inc stock a Buy, 5 rate the stock a Hold and 2 recommend a Sell. With a return potential of 12%, the stock’s consensus target price stands at $39.86.
Nordstrom shares are down over 10% on Friday, after the company reported earnings that missed expectations and offered a sales outlook that was well below forecasts, as even the most bearish buyside expectations were not prepared for a 60% EPS decline and 20% cut to FY EPS guidance.
In reaction, Morgan Stanley analyst Kimberly Greenberger reduced her price target from $42 to $34, while reiterating an Underweight rating on the stock.
Greenberger commented, “A slowdown in Nordstrom.com was a key pillar of our January downgrade, but the magnitude of the 1Q16 deceleration was far greater than even we anticipated […] We are cutting our 2016e EPS to $2.55 from $3.20 and 2017e EPS to $2.75 from $3.35. Our price target moves to $34, as we maintain our previous 12.5x P/E multiple.”
“Overall, management believes JWN’s sharp slowdown could be a function of a variety of factors, such as stock market volatility, weather,consumers spending on other discretionary categories,and even the political environment. However, we think Department Store earnings reports could point to a structural shift in consumer spending. Until better sales visibility emerges, we see a high probability for negative earnings revisions, particularly given JWN’s exposure to the high-end consumer,” the analyst concluded.
According to TipRanks.com, analyst Kimberly Greenberger has a yearly average return of 13% and a 63% success rate. Greenberger has a 6% average return when recommending JWN, and is ranked #238 out of 3913 analysts.