Cava has earned a $135 price target, implying upside of about 6% from its share price on Friday, and ‘Neutral’ rating in initial coverage by analysts at UBS.
Analysts see the fast-casual Mediterranean category leader generating 20%-plus in revenue growth over the next three years.
Low single digit to mid single digit same-store sales growth and a 15%-plus unit compound annual growth rate (CAGR) are expected to drive adjusted earnings before interest, taxes, deprecation and amortization (EBITDA) growth in the mid-20s to 30%.
Supporting same-store sales growth long-term are multiple drivers, including menu innovation, digital/loyalty and expanded awareness.
“Solid brand positioning and strength of operations and results should support a sizable long-term growth runway, while a net cash position ($344 million) and positive free cash flow (UBS estimate of $33 million in 2024) highlight balance sheet strength,” analysts wrote.
“That said, with shares up about 200% year-to-date & trading at about 100x 2025 EBITDA (versus about 45x high growth peer average), we believe valuation already reflects elevated growth expectations and we’re looking for a better entry point.”
Cava presents a significant unit growth opportunity given strong returns and sizeable whitespace, analysts added.
“Cava has successfully demonstrated concept portability to date, with a presence in 26 states, solid performance across all regions, and opportunity to expand to be a fully national brand,” they wrote.
UBS' $135 price target reflects a valuation of approximately 89 times the next 12 months' EBITDA, which is slightly above the valuation of high-growth peers since Cava’s IPO.
Shares of Cava traded hands at about $125 in the early afternoon on Friday. Since its US debut in June 2023, the stock has gained about 225%.