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On Tuesday, Sweetgreen Inc (NYSE:SG) experienced a change in its stock outlook as JPMorgan downgraded the company’s rating from Overweight to Neutral. This adjustment comes alongside a reduction in the price target, which has been set at $25, down from the previous target of $32. According to InvestingPro data, the stock has already fallen over 53% in the past six months, with current trading at $19.54 representing a significant decline from its 52-week high of $45.12.
The downgrade by JPMorgan is attributed to several factors impacting Sweetgreen, a high-growth small to mid-cap company with a market capitalization of $2.3 billion. Analysts at JPMorgan have observed a softening in underlying demand trends that is expected to continue, particularly among higher income demographics. Sweetgreen’s pricing strategy has been highlighted as a potential issue, with most of its bowls and salads containing protein priced between $13 and $17. This range is 7-30% higher than the average prices of its competitors. Despite revenue growth of 16% in the last twelve months, InvestingPro analysis shows the company remains unprofitable with a negative EBITDA of $34.6 million.
Additionally, the analysts noted that loyalty programs, which could improve value perception and customer communication, are becoming a standard expectation in the restaurant industry. However, Sweetgreen’s efforts in this area may not be enough to differentiate the brand.
Another concern raised by JPMorgan is the imbalance between restaurant supply growth and demand. The analysts pointed out that consumer choice is expanding in a digital landscape where convenience is becoming a commodity and price transparency is prevalent. This environment could challenge Sweetgreen’s market position.
Finally, JPMorgan analysts predict that Sweetgreen is likely to remain free cash flow negative through fiscal year 2030, with a minimum cash balance of around $100 million. This situation suggests that the company may only achieve low double-digit percentage annual unit growth from fiscal year 2026 to 2030.
The revised price target of $25 is set for December 2026, indicating JPMorgan’s adjusted expectations for Sweetgreen’s performance over the next few years.
In other recent news, Sweetgreen Inc. has announced the appointment of Jason Cochran as its new Chief Operating Officer, effective May 5. Cochran brings over 25 years of leadership experience, previously serving as CEO of American West Restaurant Group (LON:RTN) and Vice President of Operations Services at Chipotle Mexican Grill (NYSE:CMG). This strategic appointment is expected to drive growth and innovation at Sweetgreen. Meanwhile, Piper Sandler has maintained a Neutral rating on Sweetgreen with a price target of $27, reflecting cautious optimism amid market volatility affecting restaurant stocks. UBS revised its price target for Sweetgreen shares to $35 from $45, citing near-term challenges like weather conditions and wildfires, but still maintains a Buy rating due to the company’s long-term growth potential.
Similarly, TD Cowen adjusted its price target to $33 from $45, while keeping a Buy rating, noting a slowdown in year-to-date traffic but identifying new growth drivers. Sweetgreen’s fourth-quarter adjusted EBITDA showed a loss of $0.6 million, missing projections due to weaker-than-expected same-store sales and increased operating expenses. RBC Capital also lowered its price target to $30 from $45, maintaining an Outperform rating despite Sweetgreen’s 2025 guidance falling short of expectations. The company plans to enhance its menu, introduce a loyalty program, and increase marketing efforts, which are expected to support sales growth.
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