After Mediterranean-themed restaurant CAVA Group, Inc. (NYSE:CAVA) served up robust progress final 12 months, buyers are hoping for a second course in 2024. Shares of the fast-casual chain hit a contemporary report excessive of $77.14 on Monday, lower than a 12 months after opening at an IPO value of $42.00. The mid-cap high-flier is up greater than 70% year-to-date and is displaying no signal of slowing down.
CAVA Group is an up-and-coming restaurant operator that’s based mostly in Washington, D.C. Boldly going head-to-head with Chipotle (NYSE:CMG), it presents quite a lot of heart-healthy Mediterranean bowls and pitas at areas throughout the US.
CAVA Group inventory is presently on a formidable seven-month win streak on the backs of some robust 2023 financials. In a tricky discretionary spending surroundings, the corporate grew income and same-restaurant gross sales by 60% and 18%, respectively, final 12 months. It isn’t solely rising by increasing its footprint but in addition by producing increased gross sales at present areas.
Along with producing robust top-line progress, CAVA Group is already worthwhile. The corporate has recorded income in every of the primary three quarters since going public in June 2023. It is usually three-for-three in surpassing Wall Avenue earnings estimates.
I’m optimistic about CAVA Group’s potential to duplicate its above-industry progress, going ahead. The restaurant chain has created a distinct segment class inside the fast-growing limited-service restaurant area. Its meals matches shoppers’ growing demand for wholesome protein, greens, and fruits as a part of broader U.S. well being and wellness developments. By the second half of this 12 months, CAVA Group plans to have steak on the menu in any respect areas.
CAVA Group is poised to construct off its current success by staying in tune with buyer preferences and opening many new shops.
Aggressive Retailer Enlargement
In 2023, CAVA Group opened 72 new eating places, a 30% enhance from 2022. This was a gutsy transfer, contemplating inflation and elevated bank card charges had huge impacts on American discretionary budgets. The corporate is doubling down on its aggressive growth technique. It expects to construct 48 to 52 extra eating places this 12 months to convey its complete unit rely to no less than 357. This will solely be the start.
CAVA Group ended 2023 with 309 eating places throughout 24 U.S. states. Administration believes the corporate is within the early levels of growth and has the potential to prime 1,000 areas by 2032. The corporate usually targets upper-middle-income households in extremely populated city and suburban settings. Catering to higher-earning shoppers positively performed a task in final 12 months’s outperformance, and this makes CAVA Group a comparatively economy-proof restaurant inventory.
The Midwest U.S. is anticipated to be a spotlight space for 2024 growth. This plan was confirmed on April 26 when CAVA Group opened its first Chicago-area location. It marked the chain’s first step into the higher Midwest market. The Southeastern and Southwestern U.S. is the place CAVA Group has its largest presence, with greater than 130 areas.
Later this month, we’ll be taught if the corporate’s progress technique is off to a great begin this 12 months. CAVA Group is scheduled to announce 2024 first-quarter monetary outcomes after the market closes on Could 28. Within the fourth quarter of 2023, increased premium merchandise orders and moderating enter prices led to a shock revenue. The present consensus estimate for 2024 first-quarter EPS is $0.03.
Is CAVA Inventory a Purchase, In keeping with Analysts?
Regardless of the inventory’s robust year-to-date efficiency, Wall Avenue analysis companies stay largely bullish on CAVA Group. Up to now three months, the inventory has acquired eight Purchase rankings and three Maintain rankings.
Final month, Argus Analysis analyst Christine Dooley upgraded CAVA Group from Maintain to Purchase. Dooley pounced on the sell-off from a 52-week excessive to boost her score, saying the restaurant “has an extended runway to progress.”
Additionally final month, Wedbush analyst Nick Setyan saved a Purchase score on CAVA Group. Setyan equally thinks the corporate is well-positioned for long-term progress pushed by retailer growth, menu innovation, digital initiatives, and a revamped loyalty program. The analyst set a Avenue-high $74.00 value goal on CAVA.
What Is the Consensus Worth Goal for CAVA Inventory?
CAVA Group shares have already exceeded Wall Avenue’s highest value goal of $74.00. In the meantime, the newest CAVA inventory consensus value goal is $63.82, which means 13.9% draw back from present ranges. This might imply CAVA is due for a pullback. Then again, one other robust earnings report might trigger analysts to spice up their value targets.
The Backside Line on CAVA Inventory
CAVA Group shares have greater than doubled from their October 2023 low as a result of better-than-expected earnings releases and a vivid long-term progress outlook. As the corporate’s aggressive growth story performs out, progress metrics might proceed to impress. The inventory seems overheated within the close to time period, although, so ready for a dip might swimsuit bullish buyers.
