CAVA Group shares jumped over 16% Friday after the restaurant group showcased growth potential following its strong second-quarter performance.
Same-store sales beat expectations by 700 basis points and adjusted EBITDA reached $34.3 million, well above the consensus estimate of $29.2 million.
Analysts are bullish across the board. Jefferies raised its price target for the stock from $94 to $117, highlighting a "solid beat" on same-store sales (SSS) and adjusted EBITDA, driven by a 14.4% increase in SSS.
The report highlights that CAVA's recent success is driven by robust customer traffic and a favorable response to new menu items, particularly steak, which exceeded internal expectations. Jefferies analysts noted, "The latter [steak] meaningfully beat internal expectations and saw additional support from effective media/social campaigns."
Jefferies views CAVA’s FY24 guidance as conservative, with potential for further upside through menu innovation, digital enhancements, and operational efficiencies. The analysts believe that the company's margin guidance for the year is achievable, stating: "We see additional opportunities for leverage/flow-through that should prove the high-end of guide attainable."
The report also highlights the company’s strong development pipeline, with 18 new units added in Q2, outperforming expectations. "We see a high degree of visibility into management's 15%+ growth algorithm in the near to medium term," the analysts added.
Elsewhere, Barclays and TD Cowen also updated their ratings on CAVA, contributing to an average price target of around $109.
Analysts believe that CAVA's development strategy, including new market entries and stable build costs, offers a clear path to sustained growth, with expectations for the company to continue outperforming in both same-store sales and new unit productivity.
Despite the upbeat outlook, the consensus price target of $109 suggests a slight downside from the current stock price, reflecting a cautious approach to near-term expectations.