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On Tuesday, UBS analyst Dennis Geiger revised the price target for CAVA Group Inc (NYSE:CAVA) to $112 from the previous $125, while keeping a neutral stance on the stock. Currently trading at $100.53 with a market capitalization of $11.4 billion, CAVA has seen its stock price decline by 33% over the past six months. The adjustment comes ahead of the company’s first-quarter results, expected to be announced on May 15, 2025.
Geiger anticipates that CAVA Group will report strong same-store sales (sss) trends, which are likely to persist into the second quarter, potentially leading to better-than-expected margins and EBITDA. The company has demonstrated impressive revenue growth of 32.25% in the last twelve months, with a healthy gross margin of 37.52%. The analyst pointed out the company’s continued strength in new store performance, with year one average unit volumes (AUVs) projected at $2.3 million and year two AUVs at $2.5 million. Additionally, second-year restaurant-level margins (RLM) are expected to hit 22%, which could underpin robust cash-on-cash returns of at least 40%. InvestingPro analysis reveals the company maintains a strong financial position with a current ratio of 2.97, indicating solid liquidity.
Investor expectations, as noted by Geiger, include first-quarter same-store sales to be slightly above the consensus estimate of 10.1% or to range between 10.5% and 11.5%. For the second quarter, despite challenging year-over-year comparisons, consensus figures are around 7.2% for same-store sales, with investors hoping for results that meet or exceed these numbers.
The market is also watching to see if CAVA will maintain or raise its 2025 same-store sales guidance of 6-8%, with the consensus at 7.5%. Historically, management has tended to guide conservatively and outperform their forecasts. The second half of the year is another focal point, with investors generally expecting high single-digit same-store sales growth, as CAVA faces the task of outdoing the previous year’s successful steak launch.
In summary, Geiger views CAVA as an attractive growth story, with unique menu offerings and appealing new unit returns. However, the analyst calls for more evidence of sustained growth in a challenging economic environment and against tough comparisons before becoming more constructive on the stock, given its current valuation and market expectations. According to InvestingPro’s Fair Value analysis, CAVA appears to be trading above its intrinsic value, with high valuation multiples across various metrics. Investors seeking deeper insights can access CAVA’s comprehensive Pro Research Report, one of 1,400+ detailed company analyses available on InvestingPro, which includes additional valuation metrics, growth prospects, and expert analysis.
In other recent news, CAVA Group Inc has been the focus of several analyst updates and market evaluations. Citi analysts have revised their price target for CAVA to $114, maintaining a Neutral rating, while adjusting their earnings per share estimates for 2025 and 2026 to $0.46 and $0.63, respectively. Meanwhile, Bernstein has upgraded CAVA’s stock rating to Outperform, holding the price target at $115, citing the recent share price decline as an attractive opportunity for investors. In another development, TD Cowen has reduced CAVA’s price target to $120 but reaffirmed a Buy rating, noting the stock’s potential for growth despite a significant drop in its share price.
Additionally, Stifel analysts have expressed caution regarding US restaurant stocks, including CAVA, due to potential economic downturns, but still favor CAVA for its robust sales momentum. BofA Securities has initiated coverage of CAVA with a Buy rating and a $112 price target, highlighting the company’s strong business model and growth potential. These recent developments indicate varied analyst perspectives on CAVA’s financial outlook and market positioning. Investors are closely watching CAVA as it prepares to release its first-quarter earnings, with expectations set by these analyses.
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