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On Friday, Citi analysts upgraded Sweetgreen Inc (NYSE:SG) stock from Neutral to Buy and increased the price target to $49 from the previous $44. The upgrade was based on a detailed analysis of the company's Infinite Kitchen (IK) unit growth and remodels. The research suggests there is potential for significant financial improvement, with expectations of mid-teens store profit growth by 2029 and nearly 50% upside in discounted cash flow (DCF) valuations.
Citi's analysis indicates that management's confidence in the financial benefits of Sweetgreen's initiatives could change the narrative around the company's value proposition by 2025. This shift is expected to address one of the key concerns of skeptics, who have questioned the company's pricing strategy in relation to consumer income levels and store footfall data.
The analysts at Citi believe that the growing discussion about Sweetgreen's strategic pricing, referred to as 'weaponizing price,' could improve market sentiment and drive a higher stock multiple. This, combined with anticipated positive revisions to earnings estimates as the year progresses, underpins the decision to upgrade the stock rating to Buy with a High Risk (1H) designation.
Sweetgreen, known for its healthy and sustainable fast-casual dining options, has been focusing on expanding its footprint with the Infinite Kitchen concept. This initiative is seen as a key driver for the company's future growth and profitability.
The upgraded rating and new price target reflect Citi's optimistic view of Sweetgreen's strategic direction and potential for financial performance improvement. The analyst's comments underscore a belief in the company's ability to navigate the competitive landscape and leverage its pricing strategy effectively.
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