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CAVA Stock Falls 29% in 3 Months: Should You Buy, Sell or Hold?
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Shares of CAVA Group, Inc. (CAVA - Free Report) have taken a beating, plunging 29.2% over the past three months, significantly underperforming the Zacks Retail – Restaurants industry’s 0.5% dip. The stock has also lagged the Zacks Retail-Wholesale sector’s and the S&P 500’s decline of 6.1% and 6.6%, respectively.
CAVA Three-Month Price Performance
Image Source: Zacks Investment Research
Analysts believe that consumer behavior is becoming increasingly discerning, which could impact growth rates across the industry and present challenges for CAVA. With the company trading 51.4% below its 52-week high of $172.40, investors are left wondering: Is this a buying opportunity or a red flag? Let’s dive into the key factors driving the stock’s decline and what lies ahead.
What’s Weighing on CAVA Stock?
CAVA's recent stock decline can be attributed to multiple factors, including global market weakness, ongoing tariff uncertainties and concerns over its stretched valuation. Broader macroeconomic uncertainty, high interest rates and geopolitical risks have further contributed to the bearish sentiment.
The broader economic environment presents additional challenges. Inflation and shifting consumer spending patterns could dampen demand for CAVA’s premium-priced offerings. In a downturn, price-sensitive consumers may trade down to lower-cost fast-food options, impacting CAVA’s traffic and sales. Additionally, competition in the fast-casual space remains intense, with major brands expanding their healthier menu options, potentially eroding the company’s competitive edge.
CAVA's profitability is increasingly vulnerable to rising input costs, including food, labor, utilities, and real estate. It relies heavily on chicken, a commodity prone to price fluctuations due to weather conditions, feed costs and market demand. Additionally, imported ingredients and supplies, such as bowls, lids and certain food products, are subject to tariffs and supply chain disruptions, making cost control even more challenging.
CAVA’s business model relies on sourcing fresh, high-quality ingredients, but its supply chain is not fully secured by long-term pricing agreements. Many ingredients are purchased on the open market, making the company exposed to volatility in commodity prices. Although CAVA has implemented measures such as portion control, off-peak food production, and waste management to mitigate cost increases, it remains cautious of the uncertain macroeconomic environment.
Can CAVA Turn Things Around?
Technology-Driven Innovation: Investments in technology have played a crucial role in enhancing CAVA’s operational efficiency and customer experience. The company is expanding its AI-powered video technology to more locations in 2025, optimizing kitchen operations and streamlining service. Additionally, a new kitchen display system has been implemented to improve digital order accuracy and efficiency, with plans to roll it out to 250 restaurants. CAVA has refined its labor and deployment model, ensuring optimized staffing that enhances both team member experience and service quality. These technological advancements position CAVA for sustained growth and improved margins.
Aggressive Expansion Strategy: CAVA has continued its aggressive expansion efforts, increasing its market penetration and brand recognition. In 2024, the company opened 58 net new restaurants, bringing its total number of locations to 367. A key milestone was its entry into Chicago, marking its presence in the Midwest. In 2025, the company plans to open new restaurants in Detroit, Indianapolis and Pittsburgh. With an expected 62 to 66 new restaurant openings this year, CAVA is poised to capitalize on its growing customer base and demonstrate its scalability across diverse markets.
Menu Innovation: Menu innovation remains a key driver of CAVA’s market differentiation and customer appeal. The introduction of grilled steak in 2024 exceeded expectations, driving increased sales of premium products. Additionally, the launch of garlic ranch pita chips showcased CAVA’s ability to expand into new food categories, appealing to a broader range of consumers. The company plans to continue introducing new menu items that cater to evolving consumer tastes, reinforcing its brand relevance and competitive edge in the industry.
CAVA’s 2025 Outlook: Reasons for Optimism
The outlook for CAVA in 2025 remains positive. Same-restaurant sales are expected to grow between 6% and 8%, while restaurant-level profit margins are projected to reach between 24.8% and 25.2%. The company projects adjusted EBITDA to be between $150 million and $157 million.
CAVA has no plans for further price increases this year, indicating confidence in its ability to drive profitability through operational efficiencies rather than pricing adjustments. With demand remaining strong and its strategic initiatives in place, CAVA is well-positioned for sustained success.
The Zacks Consensus Estimate for CAVA’s 2025 earnings per share and sales reflects growth of 31% and 24.1%, respectively, on a year-over-year basis.
Valuation and Technical Insights for CAVA Stock
The stock sharing space with BJ's Restaurants, Inc. (BJRI - Free Report) , Brinker International, Inc. (EAT - Free Report) , and Dutch Bros Inc. (BROS - Free Report) in the same industry - is currently trading at a premium. CAVA is currently trading at a forward 12-month price-to-sales (P/S) multiple of 7.73X, well above the industry average of 4.11X.
Image Source: Zacks Investment Research
From a technical perspective, CAVA stock is currently trading below its 50-day moving average, signaling a bearish trend. This could deter momentum-driven investors and may lead to further short-term volatility in the stock price.
CAVA Stock Trades Below 50-Day Moving Average
Image Source: Zacks Investment Research
CAVA Stock’s Investment Strategy
CAVA remains a promising player in the fast-casual dining space, supported by its aggressive expansion strategy, strong brand engagement, and continued menu innovation. While recent stock weakness has been driven by valuation concerns, rising input costs and broader macroeconomic uncertainties, the company’s focus on technology-driven efficiencies, customer loyalty initiatives and new market entries provides a cushion against short-term pressures.
CAVA’s ability to maintain strong same-restaurant sales growth and expand its footprint should drive long-term gains. However, near-term headwinds, including inflationary pressures, supply chain challenges, and competitive dynamics, could limit immediate upside potential.
Given these factors, existing investors may find it prudent to hold on to this Zacks Rack #3 (Hold) stock as it navigates these challenges while maintaining a long-term growth trajectory. However, new investors may want to wait for a more favorable entry point, as ongoing cost pressures and valuation concerns could keep the stock volatile in the near term.
Image: Bigstock
CAVA Stock Falls 29% in 3 Months: Should You Buy, Sell or Hold?
Shares of CAVA Group, Inc. (CAVA - Free Report) have taken a beating, plunging 29.2% over the past three months, significantly underperforming the Zacks Retail – Restaurants industry’s 0.5% dip. The stock has also lagged the Zacks Retail-Wholesale sector’s and the S&P 500’s decline of 6.1% and 6.6%, respectively.
CAVA Three-Month Price Performance
Image Source: Zacks Investment Research
Analysts believe that consumer behavior is becoming increasingly discerning, which could impact growth rates across the industry and present challenges for CAVA. With the company trading 51.4% below its 52-week high of $172.40, investors are left wondering: Is this a buying opportunity or a red flag? Let’s dive into the key factors driving the stock’s decline and what lies ahead.
What’s Weighing on CAVA Stock?
CAVA's recent stock decline can be attributed to multiple factors, including global market weakness, ongoing tariff uncertainties and concerns over its stretched valuation. Broader macroeconomic uncertainty, high interest rates and geopolitical risks have further contributed to the bearish sentiment.
The broader economic environment presents additional challenges. Inflation and shifting consumer spending patterns could dampen demand for CAVA’s premium-priced offerings. In a downturn, price-sensitive consumers may trade down to lower-cost fast-food options, impacting CAVA’s traffic and sales. Additionally, competition in the fast-casual space remains intense, with major brands expanding their healthier menu options, potentially eroding the company’s competitive edge.
CAVA's profitability is increasingly vulnerable to rising input costs, including food, labor, utilities, and real estate. It relies heavily on chicken, a commodity prone to price fluctuations due to weather conditions, feed costs and market demand. Additionally, imported ingredients and supplies, such as bowls, lids and certain food products, are subject to tariffs and supply chain disruptions, making cost control even more challenging.
CAVA’s business model relies on sourcing fresh, high-quality ingredients, but its supply chain is not fully secured by long-term pricing agreements. Many ingredients are purchased on the open market, making the company exposed to volatility in commodity prices. Although CAVA has implemented measures such as portion control, off-peak food production, and waste management to mitigate cost increases, it remains cautious of the uncertain macroeconomic environment.
Can CAVA Turn Things Around?
Technology-Driven Innovation: Investments in technology have played a crucial role in enhancing CAVA’s operational efficiency and customer experience. The company is expanding its AI-powered video technology to more locations in 2025, optimizing kitchen operations and streamlining service. Additionally, a new kitchen display system has been implemented to improve digital order accuracy and efficiency, with plans to roll it out to 250 restaurants. CAVA has refined its labor and deployment model, ensuring optimized staffing that enhances both team member experience and service quality. These technological advancements position CAVA for sustained growth and improved margins.
Aggressive Expansion Strategy: CAVA has continued its aggressive expansion efforts, increasing its market penetration and brand recognition. In 2024, the company opened 58 net new restaurants, bringing its total number of locations to 367. A key milestone was its entry into Chicago, marking its presence in the Midwest. In 2025, the company plans to open new restaurants in Detroit, Indianapolis and Pittsburgh. With an expected 62 to 66 new restaurant openings this year, CAVA is poised to capitalize on its growing customer base and demonstrate its scalability across diverse markets.
Menu Innovation: Menu innovation remains a key driver of CAVA’s market differentiation and customer appeal. The introduction of grilled steak in 2024 exceeded expectations, driving increased sales of premium products. Additionally, the launch of garlic ranch pita chips showcased CAVA’s ability to expand into new food categories, appealing to a broader range of consumers. The company plans to continue introducing new menu items that cater to evolving consumer tastes, reinforcing its brand relevance and competitive edge in the industry.
CAVA’s 2025 Outlook: Reasons for Optimism
The outlook for CAVA in 2025 remains positive. Same-restaurant sales are expected to grow between 6% and 8%, while restaurant-level profit margins are projected to reach between 24.8% and 25.2%. The company projects adjusted EBITDA to be between $150 million and $157 million.
CAVA has no plans for further price increases this year, indicating confidence in its ability to drive profitability through operational efficiencies rather than pricing adjustments. With demand remaining strong and its strategic initiatives in place, CAVA is well-positioned for sustained success.
The Zacks Consensus Estimate for CAVA’s 2025 earnings per share and sales reflects growth of 31% and 24.1%, respectively, on a year-over-year basis.
Valuation and Technical Insights for CAVA Stock
The stock sharing space with BJ's Restaurants, Inc. (BJRI - Free Report) , Brinker International, Inc. (EAT - Free Report) , and Dutch Bros Inc. (BROS - Free Report) in the same industry - is currently trading at a premium. CAVA is currently trading at a forward 12-month price-to-sales (P/S) multiple of 7.73X, well above the industry average of 4.11X.
Image Source: Zacks Investment Research
From a technical perspective, CAVA stock is currently trading below its 50-day moving average, signaling a bearish trend. This could deter momentum-driven investors and may lead to further short-term volatility in the stock price.
CAVA Stock Trades Below 50-Day Moving Average
Image Source: Zacks Investment Research
CAVA Stock’s Investment Strategy
CAVA remains a promising player in the fast-casual dining space, supported by its aggressive expansion strategy, strong brand engagement, and continued menu innovation. While recent stock weakness has been driven by valuation concerns, rising input costs and broader macroeconomic uncertainties, the company’s focus on technology-driven efficiencies, customer loyalty initiatives and new market entries provides a cushion against short-term pressures.
CAVA’s ability to maintain strong same-restaurant sales growth and expand its footprint should drive long-term gains. However, near-term headwinds, including inflationary pressures, supply chain challenges, and competitive dynamics, could limit immediate upside potential.
Given these factors, existing investors may find it prudent to hold on to this Zacks Rack #3 (Hold) stock as it navigates these challenges while maintaining a long-term growth trajectory. However, new investors may want to wait for a more favorable entry point, as ongoing cost pressures and valuation concerns could keep the stock volatile in the near term.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.