What Happened?
Shares of mediterranean fast-casual restaurant chain CAVA (NYSE: CAVA) fell 2.6% in the afternoon session after 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.
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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 18 days ago when the stock dropped 3.4% on the news that markets continued to decline, as investors grew cautious ahead of a key speech by Federal Reserve Chair Jerome Powell. The move came as U.S. equity markets recorded a fifth consecutive day of losses for major indexes like the S&P 500, with technology stocks experiencing the largest declines. Investors have grown wary that the sharp rally in the tech sector since April may have advanced too far. The market-wide caution is largely driven by the upcoming Jackson Hole symposium, a meeting of central bankers, where traders are anxiously awaiting Fed Chair Powell's speech on Friday for guidance on the future path of interest rates.
CAVA is down 43.4% since the beginning of the year, and at $65.16 per share, it is trading 56.8% 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 $1,488.
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