What Happened?
A number of stocks jumped in the afternoon session after analysts at Bernstein highlighted a potential recovery for the sector in 2026.
After a challenging 2025 marked by weakened consumer confidence, the firm anticipates a gradual traffic recovery. Several factors could stimulate consumer demand, including an upcoming Tax Bill and the U.S.-hosted Soccer World Cup, with effects potentially starting in the spring. This optimistic outlook was supported by restaurant valuations hitting 10-year lows, suggesting significant upside if consumer spending data improves. Following a period where households cut back on dining out due to inflation, larger tax rebate checks are also seen as a potential catalyst for a rebound in casual dining.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Sit-Down Dining company Darden (NYSE:DRI) jumped 3.8%. Is now the time to buy Darden? Access our full analysis report here, it’s free for active Edge members.
- Modern Fast Food company CAVA (NYSE:CAVA) jumped 6.7%. Is now the time to buy CAVA? Access our full analysis report here, it’s free for active Edge members.
- Modern Fast Food company Shake Shack (NYSE:SHAK) jumped 9.1%. Is now the time to buy Shake Shack? Access our full analysis report here, it’s free for active Edge members.
- Traditional Fast Food company Krispy Kreme (NASDAQ:DNUT) jumped 5.3%. Is now the time to buy Krispy Kreme? Access our full analysis report here, it’s free for active Edge members.
- Sit-Down Dining company Cracker Barrel (NASDAQ:CBRL) jumped 8.5%. Is now the time to buy Cracker Barrel? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Shake Shack (SHAK)
Shake Shack’s shares are very volatile and have had 26 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 21 days ago when the stock dropped 1.8% on the news that a weak November jobs report raised concerns about consumer spending, which could impact restaurant sales.
The report revealed that the U.S. unemployment rate rose to a three-year high of 4.6%, its highest level since 2021. This data created caution among traders, who worried that a weaker job market might lead consumers to cut back on discretionary purchases, such as dining out. Reflecting these broader concerns, the Russell 2000 index, which tracks smaller companies, also declined. The restaurant sector as a whole had already faced pressures from higher costs and subdued customer traffic. Adding to the day's news, analysts at Jefferies maintained a "Hold" rating on the company's shares.
Shake Shack is up 7.4% since the beginning of the year, but at $89.68 per share, it is still trading 36.9% below its 52-week high of $142.03 from July 2025. Investors who bought $1,000 worth of Shake Shack’s shares 5 years ago would now be looking at an investment worth $1,032.
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