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Wednesday, Citi analysts adjusted their outlook on CAVA Group Inc (NYSE:CAVA), reducing the price target to $120 from the previous $140, while keeping a Neutral rating on the stock. Currently trading at $99.30, CAVA sits between analysts’ targets ranging from $110 to $195, with a consensus recommendation of 2.12 (Buy). According to InvestingPro data, six analysts have recently revised their earnings expectations upward for the upcoming period. The adjustment follows the company’s recent financial update, which provided a glimpse into its performance and expectations.
CAVA Group’s guidance for the first quarter to date sales trends has been received with a degree of optimism, as it surpassed the full-year 2025 guidance for same-store sales (SSS). This optimism is supported by the company’s strong revenue growth of 34% in the last twelve months and a healthy gross profit margin of 37.6%. The company also reassured that there has been no significant shift in consumer behavior. Additionally, CAVA Group confirmed its forecast for mid-single to high-single digit comparable store sales growth (MSD-HSD comps) and plans to open 62 to 66 new restaurant outlets (NROs) within the year, aligning with Wall Street’s expectations.
Despite these positive indicators, there are areas that may concern investors. The forecast for FY25 EBITDA is set at $150-$157 million, which falls short of both Citi’s and the broader market’s expectations of $161 million and $162 million, respectively. Moreover, the company is facing a deceleration in one-year and multi-year comparable store sales trends. While these points could be seen as drawbacks, InvestingPro analysis shows the company maintains a strong financial health score of 2.55 (GOOD) and operates with a moderate level of debt. Get access to over 30 additional key metrics and insights with InvestingPro’s comprehensive research report.
The analyst’s commentary suggests that the updated guidance and the company’s performance should be enough to maintain investor confidence in CAVA Group’s stock. This comes after the stock experienced a significant drop of approximately 30% over the past three months, with technical indicators from InvestingPro suggesting the stock is in oversold territory. Despite the recent decline, CAVA has delivered a remarkable 96.6% return over the past year. The current outlook, according to Citi, indicates that the stock has the potential to stabilize following this period of decline.
In other recent news, CAVA Group Inc. reported impressive financial results for the fourth quarter of 2024, surpassing earnings expectations. The company achieved an earnings per share of $0.05, outperforming the anticipated loss of $0.01, and reported revenue of $225.1 million, which exceeded the forecasted $193.41 million. This marks a significant year-over-year revenue growth of 36.8%, alongside a 60% increase in adjusted EBITDA. Analysts from Morgan Stanley (NYSE:MS) and Stifel have noted the company’s robust performance and strategic expansion plans, including the opening of 62-66 new restaurants in 2025. The firm also plans to implement a modest 1.7% menu price increase. Furthermore, CAVA’s recent earnings call highlighted the company’s focus on leveraging technology and data personalization to enhance customer experiences. Despite these strong financials, the company acknowledges potential challenges such as supply chain disruptions and competitive pressures. However, CAVA remains optimistic about sustaining growth and profitability in the coming year.
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