TLDR
- CAVA stock down 30% since August earnings, trading at $58.76 near 52-week low
- Jefferies maintains Buy rating with $100 price target, sees 70% upside potential
- COO Jennifer Somers departed Friday, interim replacement named
- Gen Z spending pressures from student loans hurt same-store sales growth
- Company posted 2.1% same-store sales growth versus 6% analyst expectations
CAVA stock closed Monday at $58.76 after a 6% drop in the prior session. The Mediterranean fast-casual restaurant chain has lost 48% of its value year-to-date.
Jefferies reaffirmed its Buy rating Tuesday despite the steep decline. The firm maintained its $100 price target, implying potential gains of more than 70% from current levels.
Same-store sales concerns have driven the selloff since August. CAVA reported second-quarter same-store sales growth of just 2.1%, missing the 6% consensus estimate.
The company cut its annual same-store sales growth forecast in August. This marked the first reduction since CAVA went public on the New York Stock Exchange in 2023.
Analyst Price Targets Adjusted Lower
Multiple Wall Street firms revised their CAVA stock targets following the disappointing results. CFRA set its target at $120, while Bernstein SocGen and Piper Sandler moved to $100.
TD Cowen established the lowest price target at $90. The range of targets reflects uncertainty about when same-store sales will recover.
Jefferies expects improvement through 2026 and beyond. The firm pointed to CAVA’s strong fundamentals outside of comparable sales metrics.
The company generated $125.91 million in EBITDA over the trailing twelve months. Revenue growth reached 28.21% during the same period.
Jefferies highlighted CAVA’s 25% EBITDA growth rate as attractive compared to restaurant industry peers. The firm also noted the chain’s 15% unit expansion rate offers upside potential.
Leadership Transition During Turbulent Period
CAVA announced Friday that COO Jennifer Somers had left the company. Senior Vice President of Operations Jonathan Braatvedt took over her responsibilities temporarily.
The departure comes at a challenging time for the Mediterranean restaurant chain. No specific reason was given for Somers’ exit.
Retail investors on Stocktwits turned “extremely bullish” on the stock Tuesday. Many viewed the recent decline as an overreaction and buying opportunity.
Fast-Casual Sector Faces Headwinds
Benchmark analyst Todd Brooks identified Gen Z spending pressures as a key issue. Younger consumers are visiting fast-casual chains like CAVA, Chipotle, and Sweetgreen less often.
Federal student loan payments resumed in May after a pause during the pandemic. This has strained budgets for younger diners.
Unemployment among recent college graduates rose to 5.8% in March from 4.1% a year earlier. These economic factors have reduced restaurant visits from a key demographic group.
CAVA continues expanding across the United States despite near-term challenges. The chain’s customizable bowls, pitas, and salads appeal to health-conscious customers.
The company’s market capitalization stood at $6.8 billion as of Monday’s close. Technical indicators suggest the stock is trading at oversold levels.
CAVA stock currently trades near its 52-week low of $58.53.
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