Cava group (CAVAShares rose more than 16% on Wednesday after the fast-casual Mediterranean restaurant chain beat top- and bottom-line expectations for the third quarter and raised its full-year outlook.
In the 12 weeks ending October 6Cava’s revenue rose 39% year over year to $243.8 million, driven by new restaurant openings and an 18.1% increase in same-restaurant sales. Earnings per share improved by 150% compared to the same period last year 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 great cultural cuisine category,” said Brett Schulman, CEO of Cava, in a statement declaration. “Third quarter traffic grew 12.9%, we opened 11 net new restaurants and, powered by the strength of our economic engine, generated average unit volume of $2.8 million.”
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The results far exceeded analysts’ expectations. Wall Street expected revenue of $234 million and earnings of 11 cents per share CNBC.
Following the 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:
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| Metric | New prospects | Previous prospects |
|---|---|---|
| Net new restaurant openings | 56 to 58 | 54 to 57 |
| Sales growth at the same restaurant | 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 |
Should CAVA Stocks Be Buy, Sell, or Hold?
Cava Group was red hot on the price charts in 2024 and has almost quadrupled in value to date. It will come as no surprise that analysts are optimistic about the stock sustainable consumer stocks. According to S&P global market informationthe consensus recommendation among analysts it follows is a Buy.
However, analyst price targets have failed to keep up with the rally in the US large capitalization stocks. Indeed, the average price target of $142.25 represents a steep discount from current levels. Analysts could very well raise their price targets in the coming days and weeks, following CAVA’s beat-and-raise quarter.
Financial services firm Wedbush is among the companies that raised its post-earnings price target for the stock from $155 to a Street high of $190, while maintaining its Outperform (Buy) rating.
“We view CAVA as one of the few 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 Setjan. “With improved visibility over the short and medium term, we also continue to view current revenue growth and EBITDA (earnings before interest, taxes, depreciation and amortization) expectations for 2024 and 2025 as conservative.”
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