Goldman Sachs thinks Shake Shack could surge 80% in just one year, fueled by an exclusive partnership with GrubHub

• Goldman Sachs on Wednesday increased its price target on shares of Shake Shack to $115, roughly 80% higher than where shares traded at Tuesday's close.
• The upgrade is based on positive comments Shake Shack management made around the restaurant's exclusive partnership with GrubHub.
• Shares of Shake Shack surged 10% Wednesday.
• Watch Shake Shack trade live on Markets Insider.

Goldman Sachs is a fan of Shake Shack.

On Wednesday, Goldman Sachs raised its 12-month price target on shares of the restaurant chain to $115 based on a long-term discounted cash flow that contemplates 645 company-owned units and 850 domestic and international licensed units by 2038, according to a Wednesday note.

That's a roughly 80% gain from where shares of the fast-food joint traded at Tuesday's close. Shares of Shake Shack rose as much as 10% Wednesday.

Goldman's price upgrade and reaffirmed "buy" rating on the company come following a presentation from Shake Shack's CEO Randy Garutti and CFO Tara Comonte at the ICR Conference in Orlando, Florida. During the presentation, Shake Shack management made positive comments about the company's integration with GrubHub, analyst Katherine Fogertey wrote in a note Wednesday.

So far, "details around the GRUB integration suggest the disruption could be more manageable than feared," Fogertey wrote. Shake Shack had announced in August that it would transition to an exclusive partnership with GrubHub, shifting from four delivery partners to only one starting in the third quarter.

More color on the integration with GrubHub is welcome as Shake Shack slipped as much as 14% in the third quarter when earnings showed that same-store sales growth was lower than expected, driven in part by the transition to GrubHub.

But Shake Shack since adjusted its future traffic estimates appropriately, and "as part of the partnership, GRUB has provided SHAK with detailed customer data, as well as marketing resources such as loyalty and targeted promotions," Fogertey wrote.

Beyond the GrubHub partnership, Fogertey wrote that Shake Shack has a solid lineup in 2020, including a "strong track of menu innovation, rooted in the return of old favorites" including a hot chicken sandwich and a number of new shake flavors. The updated offerings are a good thing, as a poor shake lineup contributed to weakness in the third quarter, Fogertey said.

GrubHub is also making important updates necessary for it to grow, including installing kiosks in its stores, improving its app, and "continuing a path of strong unit growth with a big focus on driving density in existing markets," Fogertey wrote.

The stock is up nearly 8% year-to-date through Tuesday's close.