Cava (CAVA) prepares to report earnings for the third quarter late Tuesday. In intraday trading, Cava stock fell from record highs.
The Mediterranean restaurant chain grew traffic 10% in the second quarter, bucking industry trends. Shares of the fast-casual rival to Chipotle Mexican Grill (CMG) have more than tripled year to date, vaulting 236%. But Chipotle invested in a rival Mediterranean fast-casual concept restaurant chain last month, a potential threat to Cava shares, analysts say.
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This Stock Could Be The Next Chipotle. But Can It Maintain Stellar Earnings Growth?
Cava Earnings
Estimates: Analysts expect Cava to earn 11 cents a share, nearly doubling from six cents a year earlier. They forecast that revenue will surge 33% year over year, to $233.1 million, according to FactSet. That would mark at least the third straight quarter of sales growth above 25%.
Same-store sales are seen rising 12%, down slightly from Q2’s 14.4% pace.
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This Stock Could Be The Next Chipotle. But Can It Maintain Stellar Earnings Growth?
Results: Check back after the close.
Outlook: Wall Street expects Cava to post full-year adjusted earnings before interest, taxes, depreciation and amortization of $116.7 million, a 58% increase from 2023, FactSet shows. That would be above the $111.5 million midpoint of the company’s adjusted EBITDA guidance range, which it raised in August.
Cava Stock Dips
The restaurant retail stock shed 2.2% on the stock market today after hitting a record 151.56 intraday Monday. Cava stock has rallied into the Q3 earnings report, finding support at the 21-day exponential moving average. It remains well above longer-term support levels.
A successful initial public offering, Cava has nearly doubled from an early February breakout, and more than tripled from a July 2023 breakout from an IPO base.
That meteoric ascent leaves Cava without a new buy point for now, according to MarketSurge.
Fast-casual restaurant rival Sweetgreen (SG) slid on Tuesday, just above a buy point. Chipotle stock rallied further above the 50-day average, nearing a 61.25 early entry from a handle that’s slightly too low to be proper.
Chipotle Investment May Pressure Cava: Analysts
Last Thursday, Sweetgreen raised full-year guidance after narrowing Q3 losses. But revenue growth decelerated for a third straight quarter, reaching 13%.
Meanwhile, Chipotle invested in Mediterranean food chain Brassica about a month ago. Cava stock fell on the news but has since rallied to fresh highs.
Though similar to Cava, Brassica currently has just six restaurant stores. However, Chipotle said its minority stake funding should help Brassica open more locations.
Citi analysts said it was too early to size the Brassica threat. But they feared Chipotle’s move would pressure Cava shares given their current rich valuation, according to TheFly.com.
All three retail stocks rallied after president-elect Donald Trump’s Nov. 5 win. Investors expect his proposed tax cuts to boost consumer spending.
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