Cava Group
reported a strong quarter in its first financial report after going public in June. The stock has fluctuated Wednesday, but Wall Street sees the stock going higher from here.
Cava
(ticker: CAVA) is a Mediterranean fast-casual restaurant chain that functions in a similar way to
Chipotle Mexican Grill
(CMG). But instead of steak and pinto beans, customers can fill a bowl with falafel and tzatziki.
The company posted earnings and revenue for its fiscal second quarter that handily beat Wall Street expectations. Chief Executive Brett Schulman told Barron’s that despite shoppers facing rising inflation, higher interest rates, and the upcoming resumption of student loan payments, he has seen a “very resilient consumer.”
William Blair analyst Sharon Zackfia rates the stock as Outperform without a price target. Zackfia wrote in a research note that the company’s strength during the quarter was due to a “resilient customer base alongside increased awareness stemming from the company’s IPO, with trends consistently healthy across vintages, geographies, and store formats.”
Cava went public on June 15 and nearly doubled from its initial public offering price of $22 at the close that day. The restaurant chain currently has 279 locations throughout the U.S., and expects to have 1,000 open by 2032. Zackfia thinks that goal, and more, is achievable.
“Longer term, we see the potential for CAVA to generate more than $2.5 billion in revenue and roughly $400 million of adjusted Ebitda by 2032 at roughly 1,000 locations,” she wrote.
Zackfia isn’t the only analyst expecting positive growth from the company. Jefferies analyst Andy Barish raised his price target on the stock to $54 from $48 and maintained his Buy rating.
“We see an attractive runway ahead for CAVA to further scale, and believe management’s targeted 25% to 30% adjusted Ebitda growth longer-term is achievable with the remainder of its algorithm a realistic bar where multiple opportunities for upside could emerge over time,” Barish said. “The brand has set a course towards 1,000 stores by 2032, and we believe the total opportunity or TAM [total addressable market] could well exceed that longer-term target.”
Stifel analyst Chris O’Cull raised his price target on Cava to $55 from $48 and maintained his Buy rating. He wrote in a research note that the bullish stance was based on “CAVA being a category-defining brand that appeals to a growing number of consumers; new units generating high returns that we expect to continue improving as brand awareness builds; and the company’s long runway for development.”
Shares of Cava were down 0.7% Wednesday to $46.05 following a surge after-hours following the earnings report on Tuesday.
Write to Angela Palumbo at [email protected]
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