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Shares of the company have seen a significant pullback this year, falling 25% year-to-date.
Shares of CAVA Group Inc. (CAVA) ended Thursday over 4% higher after the Mediterranean fast-casual restaurant chain received an upgrade from JP Morgan, which called the stock as a "buy now and own for the long-term."
The Fly reported that JPMorgan analyst John Ivankoe upgraded Cava to ‘Overweight’ from ‘Neutral’, keeping the price target at $110.
According to the analyst, Cava is generating free cash flow "unusually early," with significant near-term operational and brand initiatives underway that are likely to boost sales and profits.
The upgrade follows Piper Sandler analyst Brian Mullan’s bullish call for Cava following its fourth-quarter results, upgrading the rating to 'Overweight' from 'Neutral' with a price target of $115.
According to Mullan, the broader fast-casual food sector is seeing "secular growth" and saw Cava as one of the best ways to cash in on that trend.
Cava’s stock has seen a significant pullback this year, falling 25% year-to-date.
Its Q4 2024 earnings missed analyst expectations, however. For Q4, EPS came in at $0.05, missing estimates of $0.07. Its revenue grew 28.3% to $225.1 million in the prior year quarter, with same-restaurant sales growth of 21.2%.
Its guidance for 2025 also fell short of same-store sales growth. For 2025, Cava projected similar restaurant sales growth as last year, between 6% and 8%.
Sentiment on Stocktwits fell to ‘bearish’ from ‘neutral’ a day ago despite the upgrade. Message volume was in the extremely low zone.
One user predicts Cava's next earnings report will show "an erosion in foot traffic in the areas hard hit by DOGE cuts," referring to the Trump administration's initiative to overhaul federal spending through layoffs and steep cost cuts. Trump has also announced a shutdown of the Department of Education in the latest effort to scale back federal spending.
Another skeptic claimed the restaurant chain was not seeing much foot traffic in a busy, upscale area in Atlanta.
But not all Wall Street analysts are bullish on Cava.
According to The Fly, Baird lowered its price target on the stock to $125 from $154 on Tuesday while keeping an 'Outperform' rating as part of a broader analysis of the restaurant industry.
Bernstein has reportedly cautioned that Cava investors hoping for medium-term margin expansion may be disappointed. The research firm expects Cava to "manage its P&L" while continuing to invest heavily in general and administrative expenses (G&A), labor, and other in-store initiatives.
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