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Takeaway: Shares tumbled as much as 11% today, after management offered unexpectedly light guidance.

An Update On Howard Penney's SHORT Shake Shack Call | $SHAK - shake shack image

Shake Shack shareholders are getting punished today. Shares of the burger chain fell as much as 11% after company guidance disappointed rosy expectations.

Hedgeye Restaurants analyst Howard Penney has been the bear on Shake Shack (SHAK). In May 2015, Penney told anchors on BloombergTV that SHAK shares were "egregiously overpriced" and had 60% to 70% downside. 

An Update On Howard Penney's SHORT Shake Shack Call | $SHAK - howard penney

Since then, SHAK shares have fallen -43%. Penney has been consistently bearish on the stock saying "Shake Shack Is One of the Most Overvalued Stocks Out There."

An Update On Howard Penney's SHORT Shake Shack Call | $SHAK - shake shack chart

The bottom line ... from Penney's original short call on the company, is that "the SHAK growth story (business model) is predicated on the view that what works well in NYC will work well in the rest of the world." However, outside Manhattan, the average restaurant's margins are slimmer because brand awareness isn’t as strong. Penney concluded:

 

"The bottom line is that, for us, there is a very good probability that SHAK begins opening up some new units that fall short of the Street’s expectations.”

That's what happened today.

For an update on Penney's latest think on SHAK, see the excerpt from the institutional research note below.

An Update On Howard Penney's SHORT Shake Shack Call | $SHAK - shake shack update

To read Penney's entire Shake Shack research note ping sales@hedgeye.com.