Analyst from Wall Street Predicts Cava's Share Price Reaching $158, Raising Buy Question
Analyst from Wall Street Predicts Cava's Share Price Reaching $158, Raising Buy Question
Cava Soup's Up: This scorching restaurant stock on the rise is Cava Group, nicknamed CAVA (currently at 0.61%). In 2024, it soared above the $170 mark before taking a breather late in the year. But don't fret, Argus Research analyst Christine Dooley thinks this pause is a golden opening for investors! She recently stood firm on her buy recommendation for the shares, accompanied by a bullish $158 price target, which is a whopping 37% higher than its current $115 price.
Should you dig in?
Get ready to be impressed! Cava Group is crushing growth figures. Revenue shot up by 39% year-over-year in the third quarter, with breath-taking same-restaurant sales surging 18%.
CEO Brett Schulman wasn't shy about sharing his excitement, declaring, "Our third-quarter results embody the strength of our Mediterranean category-defining brand and the broad appeal of our unique value proposition, pushing us toward the next major cultural cuisine category."
But it's not just about the new kids on the block. Cava Group is proving itself a player in the big leagues, showcasing its ability to grow profitably by moving net income from $6.8 million in Q3 2023 to a jaw-dropping $18 million in Q3 2024. Their restaurant-level profit margin clocks in at 25%, which is right up there with Chipotle Mexican Grill's impressive numbers.
Chipotle's Charm
But let's not forget about the Taco titan! Chipotle's shown it can deliver mind-blowing returns for shareholders over the past 15 years. But, its valuation is sky-high, with a price-to-sales multiple touching 14.8 – a bit rich even for a swiftly growing tech behemoth, but a leave-me-alone price tag for a burrito chain.
Should you heed Argus' advice?
Wall Street analysts can sometimes steer us in the right direction when it comes to dip-buying opportunities, but in this case, I'd pump the brakes. Cava Group's recovery might be just around the corner, but its long-term growth potential looks rather limited, given the ambitious targets already built into its share price.
Sources:
- Street Insider, Cava Group PK: Analyst Downgrades Shares of CAVA to Equal Weight (CAVA)
- Yahoo Finance, Cava Group, Inc. (CAVA) Q3 2024 Earnings Call Transcript
- MarketWatch, Cava Group stock jumps as restaurant chain posts strong growth numbers
- Seeking Alpha, Investing and Financial Analysis: Chipotle Mexican Grill, Inc. (CMG) Q4 2024 Earnings Report
- Barron's, Cava Group Stock Gets Raised to Hold at $125 at BofA Securities
Investors might find this pause in Cava Group's growth an attractive opportunity, given Argus Research analyst Christine Dooley's bullish $158 price target, which is 37% higher than its current $115 price. With Cava Group proving itself a profitable player in the food industry, continually increasing its revenue and net income, and maintaining a strong restaurant-level profit margin, careful investors might consider looking into the company's financials for potential investment opportunities.