Citi cuts Sweetgreen stock price target to $43, maintains buy rating

On Tuesday, Citi analysts made adjustments to their outlook on Sweetgreen Inc (NYSE: SG), lowering the price target on the company’s shares to $43.00 from the previous target of $49.00 while sustaining a Buy rating. The stock, currently trading at $25.93, has experienced significant volatility, with InvestingPro data showing a notable -11.88% decline over the past week. The revision comes amid concerns over potential impacts on fourth quarter and first quarter to-date same-store sales (SSS) due to various discrete events such as holiday shifts, winter storms, and wildfires.

The analysts noted that these factors might lead to conservative full-year SSS and revenue guidance from Sweetgreen’s management, drawing a parallel to the approach taken by Chipotle Mexican Grill (NYSE:CMG). They expressed that a softer top-line performance on a stock with a high multiple could result in volatility in the share price. According to InvestingPro data, Sweetgreen maintains a healthy current ratio of 2.59, with liquid assets exceeding short-term obligations, though analysts don’t expect profitability this year. However, they also highlighted several factors that could support the stock moving forward. These include continued evidence of the effectiveness of initiatives known as "IK," which could bolster the case for rolling out new strategies, the introduction of new products, loyalty programs, and marketing initiatives that could serve as incremental offsets throughout the year.

Furthermore, the analysts believe that any significant decline in Sweetgreen’s stock would likely attract investors who previously missed out on the initial success of the company’s initiatives. They do not foresee any fundamental debates arising about the brand’s long-term viability after the earnings release, and they anticipate that long-term investors would take advantage of any pullback in the stock’s price. With revenue growth of 21.72% in the last twelve months and 8 additional exclusive insights available on InvestingPro, subscribers can access comprehensive analysis including Fair Value estimates and financial health scores to make more informed investment decisions.

Citi’s stance remains optimistic about Sweetgreen’s potential despite the reduced price target and acknowledges that the company’s strategic efforts may continue to attract investor interest. The analysts expect that Sweetgreen’s ongoing initiatives and the introduction of new offerings will contribute to the company’s performance in the face of current challenges.

In other recent news, Sweetgreen has been the subject of significant analyst attention. Citi analysts have upgraded the Sweetgreen stock from Neutral to Buy, citing potential for significant financial improvement. They anticipate mid-teens store profit growth by 2029, driven by the company’s Infinite Kitchen unit growth and remodels. The analysts also foresee a shift in the narrative around the company’s value proposition by 2025, which could drive a higher stock multiple.

In contrast, KeyBanc Capital Markets initiated coverage on Sweetgreen with a "Sector Weight" rating, highlighting the company’s potential for growth and margin expansion, particularly through automation opportunities. However, they maintain a cautious stance due to the company’s current valuation.

TD Cowen, on the other hand, maintained its Buy rating for Sweetgreen, expressing confidence in the company’s growth strategy and the potential of its Infinite Kitchen concept. They anticipate margin expansion and see the expansion of average unit volume through the Infinite Kitchen as the next phase in the company’s growth narrative. These recent developments highlight the varying perspectives on Sweetgreen’s financial performance and strategic direction.

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