Cava Stock: Analysts Rush to Raise Price Targets After Earnings
Wedbush, for one, issued a Street-high price target for Cava stock after its beat-and-raise quarter. Here's what you need to know.
Cava Group (CAVA) stock jumped more than 16% out of the gate Wednesday after the fast-casual Mediterranean restaurant chain beat top- and bottom-line expectations for its third quarter and raised its full-year outlook.
In the 12 weeks ended October 6, Cava's revenue increased 39% year over year to $243.8 million, driven by new restaurant openings and an 18.1% jump in same-restaurant sales. Its earnings per share improved 150% from the year-ago period to 15 cents.
"Our third quarter results demonstrate the strength of our Mediterranean category-defining brand and the broad appeal of our unique value proposition, creating what is quickly becoming the next major cultural cuisine category," said Cava CEO Brett Schulman in a statement. "Third quarter traffic grew 12.9%, we opened 11 net new restaurants and, driven by the power of our unit economic engine, we generated average unit volume of $2.8 million."
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The results easily beat analysts' expectations. Wall Street was anticipating revenue of $234 million and earnings of 11 cents per share, according to CNBC.
As a result of its strong performance in the first nine months of the year, Cava raised its full-year outlook. Here's what the company now expects to achieve:
| Metric | New outlook | Previous outlook |
|---|---|---|
| Net new restaurant openings | 56 to 58 | 54 to 57 |
| Same-restaurant sales growth | 12% to 13% | 8.5% to 9.5% |
| Restaurant-level profit margin | 24.5% to 25% | 24.2% to 24.7% |
| Adjusted EBITDA | $121 million to $126 million | $109 million to $114 million |
Is CAVA stock a buy, sell or hold?
Cava Group has been red hot on the price charts in 2024, nearly quadrupling in value for the year to date. Unsurprisingly, analysts are bullish on the consumer discretionary stock. According to S&P Global Market Intelligence, the consensus recommendation among analysts it tracks is a Buy.
However, analysts' price targets have not been able to keep up with the rally in the large-cap stock. Indeed, the average price target of $142.25 represents a steep discount to current levels. Analysts may very well raise their price targets in the days and weeks ahead following CAVA's beat-and-raise quarter.
Financial services firm Wedbush is one of the firms raising their price target on the stock after earnings, to a Street-high $190 from $155, while maintaining its Outperform (Buy) rating.
"We view CAVA as one of a handful of publicly traded restaurants positioned to deliver positive annual transaction growth over the longer-term, with realistic long-term revenue and unit growth targets," says Wedbush analyst Nick Setyan. "With improved near- and medium-term visibility, we also continue to view current 2024 and 2025 same-store sales growth and EBITDA [earnings before interest, taxes, depreciation and amortization] expectations as conservative."
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