Research firm Wedbush upgraded Shake Shack (SHAK), predicting that the company's earnings before interest, taxes, depreciation and amortization would beat expectations.

OUTLOOK: Shake Shack's EBITDA can surpass analysts' consensus outlook, wrote Wedbush analyst Nick Setyan, who raised his rating on the stock to Outperform from Neutral. The company can meet its lowered 2017 comparative sales growth guidance, which implies 1% comp sales growth for the rest of this year, Setyan stated. He cites comp sales drivers that include increased use of its app, easier comparisons, higher average checks, and new food offerings. These positive catalysts should offset cannibalization from new restaurants and the impact of newer restaurants beginning to be included in the comp sales growth calculation, the analyst believes. Meanwhile, Shake Shack's newly opened restaurants will probably outperform the level anticipated by its guidance, and the company could raise prices further, Setyan wrote.

TARGET: Calling Shake Shack's valuation "compelling" at current levels, Setyan increased his price target on the shares to $43 from $33.

PRICE ACTION: In morning trading, Shake Shack rose 2.3% to $37.50.