Cava delivered another impressive beat for the third quarter, sending shares of the Mediterranean restaurant chain higher and prompting Jefferies to boost its price target on the stock.
Analysts raised their price target to $195 from $117 and awarded it a ‘Buy’ rating.
“We raise our estimates and see multiple opportunities to unlock upside long-term, where the premium valuation should remain anchored on,” they wrote in a note to clients.
Shares of Cava traded up 7.6% at about $156 in the early afternoon on Wednesday.
For the third quarter, Cava’s revenue grew 39% year-over-year to $241.5 million, ahead of estimates of $235.1 million.
Adjusted EBITDA of $33.5 million topped expectations of $29 million.
Same store sales growth was 18.1%, with guest traffic growth of 12.9% and 5.2% check including 3% menu price.
This was well above the 12.3% consensus, Jefferies’ analysts pointed out.
They noted that Cava’s raised guidance implies same store sales increasing in the high teens during Q4, above the Street consensus of 11.3%.
They see this as suggesting the traffic momentum is sustaining, with underlying demand robust from drivers such as menu innovation, and digital and guest experience.
They believe additional opportunities will arise over time in areas such as innovation across the production line, digital expansion, social and marketing to enhance awareness, and throughput and productivity through tech and operations investments.
“We see an attractive runway ahead for CAVA to further scale and view targeted 25% to 30% adjusted EBITDA growth as achievable/beatable, including above this range in 2024,” they wrote.