Why McDonald’s should fear Shake Shack

New York based Shake Shack saw its stock share prices double to $48 per share before noon on Jan. 30, and finished up at $45.80 per share by the end of the day, according to Jan. 31 Washington Post and the Wall Street Journal MarketWatch news reports.

Shake Shake made $19.5 million in 2012 and quadrupled that revenue in 2013, to $82 million, company filings show, but it is still a little fry compared with the $90 billion empire of McDonald’s Corp. The Shake Shack earned $79 million in revenue in the first nine months of last year, which is what McDonald’s earns in about a day.

According to the Washington Post, success at Shake Shack’s level is not unprecedented. Nine years ago, Chipotle’s stock debuted at $22 a share; it now trades at $710. But some stock watchers are already worrying the Shack’s chances are overheated: For his money, CNBC talking head Jim Cramer said he’d rather just buy one of the burgers.

America’s burger business is incredibly sunny: About 9 billion were ordered at American restaurants last year, up 3 percent over 2013, according to market researchers at the NPD Group. Some analysts say Shake Shack’s “better burgers” don’t have to be all that much better for the company to strike gold.

“Going out for burgers and fries is something consumers have been doing for decades,” said Elizabeth Friend, a senior analyst at market researcher Euromonitor International, “and ‘better burger’ chains have given them a new — arguably better — way to experience a perennial favorite.”

Whether Shake Shack is able to maintain that kind of slow-growing zen in the face of profit-minded shareholders will be a key tension for its next few years on Wall Street.

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