Why Shake Shack, Amarin, and Valeant Pharmaceuticals Slumped Today

Image source: Shake Shack.

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The stock market climbed higher into record territory on Thursday, overcoming a minor decline on Wednesday on renewed strength in several key sectors of the economy. In particular, favorable earnings news from several key retailers reestablished confidence that the hard-hit sector might finally be primed for a turnaround. Moreover, a substantial advance in oil prices helped reenergize the energy sector. Yet even with those favorable tailwinds helping to support the broader market, several stocks lost ground on Thursday. Among the worst performers on the day were Shake Shack (NYSE: SHAK), Amarin (NASDAQ: AMRN), and Valeant Pharmaceuticals (NYSE: VRX).

Shake Shack leaves investors hungry

Shake Shack dropped 6% after the company released its second-quarter financial report. The burger chain posted a 37% rise in revenue, sending adjusted net income up by more than half. Yet a 4.5% rise in same-restaurant sales didn't seem to satisfy investors who've gotten used to more impressive comparables in the past, and even the rapid pace of the company's growth fell short of the lofty expectations that growth investors have for Shake Shack. A host of those following the stock suggested that the day's share-price decline was overblown and represented a buying opportunity, but given the stock's extremely high valuation by conventional measures, the pullback for Shake Shack seemed consistent with concerns about whether the burger chain can sustain impressive growth rates far enough into the future to justify the share price.

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