Cava's Stock Falls 39%: Analysts See Potential Upside

Cava's stock has plummeted 39%, trading at $87 from an all-time high. However, with a recent upgrade from Piper Sandler and robust revenue growth of 33% in 2024, Cava is deemed a strong long-term investment.

Date: 07-03-2025

AI Rating: 6

Stock Performance Overview

Cava's shares have seen a significant downturn, dropping 39% recently and now trading at approximately $87, down from a peak of $172.

Analyst Ratings

Piper Sandler analyst Brian Mullen has upgraded Cava's stock rating to overweight while reducing the price target from $142 to $115, suggesting a potential upside of over 30% from current levels.

Revenue Growth

The report highlights a strong revenue growth rate of 33% for 2024, which indicates a solid business expansion and market demand for Cava's fast-casual Mediterranean-oriented dining concept.

Same-Restaurant Sales

Additionally, same-restaurant sales increased 13% for the year, showcasing effective customer retention and improved sales performance from existing locations.

Market Expansion Potential

Cava has ambitious growth plans, aiming to expand its number of locations from 367 to over 1,000 by 2032, suggesting significant market potential and room for increased revenue.

Valuation Considerations

Despite its strong performance, there are concerns over valuation metrics, with the stock peaking at 320 times earnings and 19 times sales, which are considered expensive. As of now, the stock trades at 79 times earnings and 11 times sales, more reasonable figures but still on the higher side compared to industry peers like Chipotle and McDonald's.

Operating Margins

The company reportedly has restaurant-level operating margins comparable to larger players in the fast-casual sector, indicating effective management and operational efficiency.

This information collectively positions Cava for potential recovery and growth in the coming periods, despite the current stock decline.

Stocks: CAVA