2024-06-11 10:35:07 ET
Summary
- CAVA's stock price has risen over 100% from its January lows due to a handful of drivers such as high YoY sales growth, strong average unit volume, and expansion success.
- The company is trading at an extremely high valuation with a 12+ Price/Sales multiple and a Price/Earnings nearing 300.
- A revenue model based on comp growth and new store openings suggests little opportunity for outperformance under base case assumptions.
- I would not recommend opening a CAVA position at current prices, as I expect a pull-back over the coming months and a better chance for entry.
The fast-casual Mediterranean restaurant, CAVA Group (CAVA), has had an exceptional run-up in its stock price YTD and is up over 100% from its January lows; the momentum behind this ticker has been incredible over the past few months as investors have been piling into the growth story.
CAVA YTD Chart and Metrics (Seeking Alpha)
Fundamentally, this appreciation is due to a handful of drivers:
- 30%+ YoY sales growth over the past couple of earnings reports
- High average unit volume with potential for strong same store sales growth moving forward
- Completion of Zoës Kitchen conversions to CAVA storefronts following the 2018 acquisition, bringing total footprint to 330+ locations
- A general sentiment that CAVA could be the "next" Chipotle ( CMG )
- Prevalence of momentum-based trading in 2024 markets
Read the full article on Seeking Alpha
For further details see:
CAVA Group: Strong Growth But Still Overpriced