Cava is the IBD Stock Of The Day as it hugs a short-term support level while eyeing both an early entry and a more-traditional buy point. Cava stock continues its red-hot run after an August earnings beat-and-raise, near post-IPO highs.
The fast-casual Mediterranean restaurant chain specializes in build-your-own falafel bowls and pita sandwiches, made with hearty ingredients and bold flavors. Cava stock packs a punch, too, having nearly tripled year to date.
Founded in 2010, Cava delivered its first profit on an annual basis on 60% revenue growth in 2023, the year it went public. The Washington, D.C.-based company ties its rapid growth to new and repeat customers.
Analysts call Cava the next Chipotle Mexican Grill. That larger fast-casual peer, too, had landed huge success, with its customizable bowls underpinning rapid growth. Some investors may see a similar winning story in Sweetgreen.
Cava Stock Nearing Buy Point
Shares rose 1.6% to 124.94 on the stock market today. Cava stock continues to work on a 128.18 buy point, which marks the Aug. 26 high of a short consolidation After a recent pullback, the restaurant retail stock found support at the 21-day exponential moving average. Investors could use the Oct. 1 high of 125.66 as a possible early entry, which would also break a short downtrend.
An IPO stock, Cava came public at 22 a share in June 2023. The top growth stock hit a record 58.10 on Aug. 2, 2023. It exactly halved to 29.05 last Oct. 4 before rebounding. This year, Cava stock pegged a series of new highs on the back of stronger-than-expected earnings.
It's up 152% from a first-stage cup-with-handle breakout in early February, according to MarketSurge pattern recognition. It's up more than 157% from a July 2023 breakout from an IPO base.
A standout among retail stocks, Cava bears a perfect Relative Strength Rating of 99, which means it has outperformed 99% of all stocks in the Investor's Business Daily database over the past year.
The relative strength line for Cava bolted higher over the past year, but has now flattened out a bit. A rising RS line, the blue line in the chart shown, means that a stock is outperforming the S&P 500 index.
Among favorable technical signs, Cava stock shows an up/down volume ratio of 1.7. Ratings above 1 indicate upward price pressure on a stock.
Cava stock bears a solid-enough Accumulation/Distribution Rating of B. The number of funds owning shares rose 7% in the September-ended quarter, a favorable sign, according to IBD Stock Checkup. Cava also shows four quarters of rising fund ownership.
Cava Earnings Poised To Double
This restaurant play holds a near-perfect Composite Rating of 98. The Composite Rating combines various technical and fundamental metrics into one easy-to-read score. Further, Cava boasts a solid 81 EPS Rating, no mean feat for a young company.
Every quarter since its June 2023 debut, Cava has beat analysts' earnings estimates, according to FactSet. But the latest second quarter saw the restaurant chain post its first earnings decline in six quarters, to the tune of 19%. Same-store sales also slowed but outpaced views.
On the brighter side, Cava defied the industry trend with Q2 same-store sales growth of 14.4%. Traffic grew by 9.5%. Revenue rose by 35%. The company lifted adjusted EBITDA guidance to $109 million-$114 million, from $100 million-$105 million earlier.
After the Q2 earnings blip, analysts expect a big comeback in the current and upcoming quarters. They see Cava earnings jumping 100.5% to 42 cents per share for the full year, rising another 21% in 2025.
Cava 'Doing The Same' As Chipotle Stock
"Cava seems to have found a magic formula," Wedbush analyst Nick Setyan said after the Aug. 23 report.
He, too, favorably compared Cava to Chipotle stock. "No one had been able to kind of transform the Mexican category into a national chain, and Chipotle did that," Setyan said. "Cava is doing the same thing with the Mediterranean cuisine and concept."
Cava stock surged nearly 20% on Aug. 23 and hit a high of 131.82 on Sept. 23. It is up 190% year to date.
Analysts on Wall Street remain overweight on this restaurant retail play, FactSet shows. But their consensus price target for Cava stock is 114.75, below where shares traded on Thursday.
