We recently compiled a list of the 12 Best Restaurant Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Shake Shack Inc. (NYSE:SHAK) stands against the other best restaurant stocks.
Restaurant stocks are businesses that own, run, and franchise full-service restaurants that sell prepared food and drinks at retail.
According to estimates from the National Restaurant Association, restaurant sales in the United States reached an all-time high of $1.1 trillion in 2024. The industry’s sales exceeded $1 trillion for the first time ever. According to the group, the industry’s workforce was projected to go up by 200,000 jobs in 2024, bringing its total employment to just under 16 million by the end of the year. Restaurants are facing increased competition as well as greater operating expenses, especially labor costs.
Michelle Korsmo, President & CEO of the National Restaurant Association, stated:
“With more than $1 trillion in sales expected this year, the state of the restaurant industry is strong thanks to the agility of its operators and employees,” “As our report shows, restaurants are finding ways to adapt to the challenges of increased food costs and supply chain disruption. Restaurants have responded well to customers’ desire to have more opportunities to enjoy restaurant meals, which continues to grow sales, create employment opportunities, and foster a strong sense of community.”
Nonetheless, as the macro economy continues to exhibit signs of inflation, many diners are having a tough time and are spending carefully. Furthermore, labor shortages, cost inflation, and an unstable economy that may reduce demand are issues that all restaurants are dealing with. Not every restaurant will do well in this volatile setting. However, the most remarkable financial resilience should be shown by companies that offer a strong value proposition to customers and keep a stable moat over the coming years.
As per the National Restaurant Association’s research report, the restaurant business in the United States is expected to increase further in 2025, with sales expected to exceed $1.5 trillion. Employment is predicted to jump by 200,000, bringing the total workforce to 15.9 million. Demand from customers is still strong; 90% of adults claim they like eating out because of the different tastes and experiences that restaurants provide. Value is a top priority, as 47% of operators want to launch new sales or promotions to draw clients.
However, many customers value experience more than price: 47% of limited-service diners and 64% of full-service diners place a higher value on dining experiences than on prices. On-premises traffic is a primary strategic priority, with 90% of fine dining and 87% of casual dining operators prioritizing it over off-premises sales. Despite their willingness to pay, many consumers say they would eat out more often if they had more money to spend. As operators strike a balance between innovation, price, and experience to foster loyalty and growth, these dynamics show cautious optimism.
KPMG revealed not only the challenges but also major trends that will impact the restaurant business this year, based on views from senior executives. The restaurant business expects to grow in 2025 due to the introduction of new products and the opening of more outlets. However, rising labor and food costs, as well as inflationary fears, pose serious problems, especially for franchisees. Operators are putting a high priority on digital enablement to improve customer conversion, maximize operations, and modify menus to accommodate changing customer preferences to remain competitive. Industry dynamics are still being shaped by the growing dependence on third-party ordering and delivery platforms. Lastly, it is essential to keep up a positive workplace culture to attract and keep talent.
A cook in a busy kitchen preparing a delicious cooking of burgers and fries.
Our Methodology
For this article, we sifted through the online rankings to form an initial list of the 20 Restaurant Stocks. From the resultant dataset, we chose 12 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 1009 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Shake Shack Inc. (NYSE:SHAK)
Number of Hedge Fund Holders: 43
Shake Shack Inc. (NYSE:SHAK) operates a roadside burger business. Along with excellent burgers, hot dogs, crispy chicken, frozen custard, crinkle-cut fries, shakes, beer, wine, and more, it offers a traditional American menu. A whole-muscle blend of all-natural, hormone- and antibiotic-free Angus beef is used to make the company’s burgers. The beef is ground fresh every day, grilled to order, and served on a potato bun that isn’t genetically modified. Its menu consists of a variety of traditional American foods and drinks. It is ranked eighth on our list of the Best Restaurant Stocks.
Shake Shack Inc. (NYSE:SHAK) announced a solid first quarter, with total revenue of $320.9 million and system-wide sales of $489.4 million, supported by the addition of 11 new Shacks to its global network. As a result of operational improvements and strict cost control, the company’s first-quarter restaurant-level profit margin increased by 120 basis points year over year to 20.7%, its highest since 2019. As it works toward its long-term objective of running 1,500 company-owned Shacks and aiming to cut operating and construction costs by 10% by 2025, strategic efforts are going well. The introduction of the Dubai Chocolate Pistachio Shake, which was well received by customers and swiftly sold out, revealed that innovation in the culinary arts is still the primary goal. The licensed business also grew, as evidenced by the launch of seven new Shacks under the licensing model and a 10.4% jump in revenues year over year.
BofA increased the firm’s price estimate from $89 to $97. The analyst informs investors that, similar to McDonald’s, Shake Shack Inc. (NYSE:SHAK)’s Q1 same-store sales increase of 0.2% was more in line with market expectations, even if it fell short of the consensus and the 2.5%–3.5% comp guidance that was issued in late February. Following the company’s Q2 guidance, the company reduced its Q2 same-store sales growth estimate to 1.5% after the report was released. It also reported that its FY25 EBITDA forecast was higher at $218.7 million, as opposed to $213.0 million and the previous guidance of $ 205-$215 million.
Overall, SHAK ranks 8th on our list of the Best Restaurant Stocks to Buy According to Hedge Funds. While we acknowledge the potential of SHAK as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than SHAK but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
