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On Thursday, Piper Sandler reaffirmed a Neutral rating on Sweetgreen Inc (NYSE:SG) with a consistent price target of $27.00. The stock currently trades at $25.18, with InvestingPro data showing significant volatility and average daily trading volume of 3.48M shares. The reiteration follows a tumultuous phase for the market, particularly for restaurant stocks, which has seen Sweetgreen’s shares tumble. Year-to-date, the company’s stock has declined by 22%, with a roughly 44% drop from its 52-week peak in late November.
The firm acknowledges the challenges that Sweetgreen faces, despite the company’s position as a leader in the emerging Salad category within the Fast Casual segment of the restaurant industry. While revenue grew nearly 16% in the last twelve months to $677M, InvestingPro analysis indicates the company is currently overvalued relative to its Fair Value. Piper Sandler believes in the long-term growth potential of Sweetgreen, projecting it to evolve into a significantly larger entity over time.
The analyst at Piper Sandler, Brian Mullan, provided insight on the current situation, stating, "In this note, we check in on several elements of the SG story. This comes following a period of significant volatility for the market and for restaurant equities; from which SG has not been immune." He further elaborated on the company’s position and the broader market dynamics, indicating that certain issues need to be navigated for Sweetgreen to realize its growth trajectory.
The analysis suggests that while Sweetgreen is well-positioned within its niche and the broader industry trend towards Fast Casual dining, there are immediate hurdles that must be addressed. The firm’s maintained price target of $27.00 reflects a cautious optimism, balancing the company’s growth potential against the current market realities it must contend with.
Investors and stakeholders in Sweetgreen Inc can look to this reiteration as a sign of the company’s enduring brand strength and market position, even as it grapples with the volatility that has characterized the market for restaurant equities in recent times.
In other recent news, Sweetgreen Inc. reported its fourth-quarter 2024 earnings, which fell short of analyst expectations. The company posted an earnings per share of -$0.25, missing the forecast of -$0.20, and reported revenue of $160.9 million, slightly below the anticipated $163.4 million. Despite this shortfall, Sweetgreen achieved a 15% growth in full-year sales to $676.8 million and reported its first full year of positive adjusted EBITDA at $18.7 million. Analysts have adjusted their outlooks accordingly, with UBS, TD Cowen, and RBC Capital Markets all lowering their price targets for Sweetgreen, citing various challenges including weather impacts and slower same-store sales growth. UBS reduced the target to $35, TD Cowen to $33, and RBC Capital to $30, while each firm maintained a positive rating on the stock, highlighting the company’s long-term growth potential. Sweetgreen’s strategic plans for 2025 include opening at least 40 new locations, with a focus on its Infinite Kitchen concept, which has shown promising results in terms of margins and average unit volume. The company also plans to enhance its menu offerings and introduce a new loyalty program, SG Rewards, to drive future sales growth.
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