CAVA Stock: Cava’s Hot IPO Profits Will Nearly Double in 2024; be careful about

Mediterranean fast-casual fast food chain Cava Group (CAVA) announces first-quarter results late Tuesday. CAVA shares hit a new high ahead of earnings, with its hot 2024 IPO nearly doubling.

According to The Fly, on Tuesday, Stifel increased the price target for CAVA shares to 90 from 66 and maintained a buy rating for the stock. The company predicts the report will “provide evidence of the organic flywheel effect” that occurs when incremental improvements gain momentum and lead to significant growth.

Meanwhile, Cava is an important brand offering desirable products, which increases consumer awareness and usage, the company wrote. Stifel expects Cava to report “another strong quarter” of same-restaurant sales growth.

Same-store sales will be a key metric this quarter. Analysts will be watching for further signs of slowing sales as budget-conscious customers cut back on restaurant meals. According to the Wall Street Journal, citing data from Revenue Management Solutions, traffic to fast food stores in the US decreased by 3.5% in the first three months of 2024 compared to last year. According to the WSJ, Cava raised its menu prices by about 3% nationwide in January to offset ingredient inflation.

During a March investor conference, CAVA CFO Tricia Tolivar said there could be “some churn” from customers this year due to higher prices they didn’t experience in 2023. Still, CAVA will likely benefit from customers churning full-service restaurant, Tolivar said.

Chipotle (CMG), McDonald’s (MCD) i Wendy (WEN) previously reported that same-store sales growth slowed in the first quarter. Starbucks (SBUX) in late April reported that comparable transactions in North America for the second quarter were down 7%.

But Cava is among a handful of restaurant industry companies that have bucked this trend with it Wing stop (WING), Roadhouse in Texas (TXRH), Sweet green (SG) i Chipotle Mexican Grill (CMG).

Cava’s earnings

FactSet expects wine (CAVA) earnings will increase to 5 cents per share after losing 2 cents per share last year. Revenue increased nearly 21% to $246 million.

However, same-store sales growth is expected to decline for the fourth straight quarter, falling just 1.6%, according to FactSet estimates. CAVA reported same-restaurant sales growth of 11.4% in the fourth quarter.

Continued store openings are likely to be a large revenue driver.

The Mediterranean chain has seen average earnings growth of 152.7% over the past three quarters, although growth has slowed over the past two periods.

CAVA stock performance

CAVA shares rose 0.7% to 83.50 on Tuesday afternoon, hitting a new all-time high of 86.40 for the day.

The stock is subject to extension after breaking the trend line in late April.

CAVA shares are up over 94% in 2024.

Cava is on the list of leaders in inflammatory bowel disease.

For more stock news and updates, follow Harrison Miller on Twitter @IBD_Harrison

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