What Happened?
Shares of mediterranean fast-casual restaurant chain CAVA (NYSE: CAVA) jumped 3.2% in the afternoon session after the company announced another restaurant opening in Metro Detroit, signaling continued progress in its national expansion plans.
The new location in downtown Detroit marked the company's second in Michigan, supporting its strategy to grow across the Midwest. This specific opening was part of a much broader, disciplined national expansion, with management targeting 68 to 70 new restaurants for the year.
Alongside adding new stores, CAVA also updated investors on its plans to improve efficiency. The company aimed to automate back-of-house operations for digital orders and use camera technology for managing stock. These moves showed a clear focus on using technology and a larger store footprint to drive growth.
The shares closed the day at $65.53, up 3.3% from previous close.
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What Is The Market Telling Us
CAVA’s shares are very volatile and have had 28 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 14 days ago when the stock dropped 2.6% on the news that several research firms lowered their price targets on the stock, citing concerns over sales growth and revenue performance.
The stock also hit a new 52-week low of $65.03. The negative sentiment from analysts follows recent performance data that has raised red flags. For instance, BofA Securities pointed to a modest revenue miss and same-store sales growth of 2.1%, which was well below the consensus forecast of 6.2%. Other firms, including Piper Sandler, Bernstein, CFRA, and TD Cowen, also reduced their price targets. The common concerns among analysts include the potential for negative same-store sales growth in new locations and expectations of slower sales in 2025 due to softer consumer spending impacting restaurant traffic. These collective adjustments highlight Wall Street's growing caution regarding CAVA's future prospects.
CAVA is down 43.1% since the beginning of the year, and at $65.49 per share, it is trading 56.6% below its 52-week high of $150.88 from December 2024. Investors who bought $1,000 worth of CAVA’s shares at the IPO in June 2023 would now be looking at an investment worth $1,496.
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