Cava Group is the IBD Stock Of The Day as it defies inflation and industry trends with robust earnings growth. On Wednesday, Cava stock jumped above a key level, offering an early entry. Restaurant retail stocks rallied broadly.
On Jan. 10, Argus Research named Cava stock, Amazon.com and Chipotle Mexican Group as its top stock picks for 2025 among consumer discretionary stocks. The firm's analysts highlighted the pace of new store openings and higher-priced menu items, according to TheFly.com.
Cava remains a restaurant industry outlier, ringing in double-digit growth. The Washington, D.C.-based company reported 352 stores at the end of September 2024, a 21% increase year over year. In the third quarter, same restaurant sales grew 18.1%, including guest traffic growth of 12.9%.
The fast-casual Mediterranean restaurant chain specializes in build-your-own falafel bowls and pita sandwiches, made with healthy ingredients and bold flavors. Cava stock packs a fiery punch, too, having soared 178% from a cup-with-handle breakout last February.
Cava Stock Retakes Key Level, Restaurant Retail Stocks
Shares of Cava popped 7.4% to 135.27 in Wednesday's stock market action. Cava stock regained the 50-day moving average for the first time since December, setting up a buy zone from 130.60 to 133.21.
Both Cava and close rival Sweetgreen plunged in December after big rallies. Reports of insider selling may have slammed Cava stock.
On Wednesday, IBD added Cava to SwingTrader on the 50-day bounce, with an entry at 131. Cava shares found a place alongside Consumer Discretionary Select Sector SPDR ETF on SwingTrader.
The relative strength line for Cava stock is starting to trend higher, a favorable sign. A rising RS line means that a stock is outperforming the S&P 500 index. It is the blue line in the chart provided.
A 94 RS Rating means that CAVA has outpaced 94% of all stocks in IBD's database over the past year.
Among other restaurant retail stocks, food-delivery service DoorDash is on the IBD Leaderboard. Coffee chain Dutch Bros. is on the IBD 50 list of top growth stocks.
On Wednesday, Brinker International and Starbucks scored earnings gap-ups. Starbucks stock topped a 103.32 buy point, according to MarketSurge charts.
Cava Earnings And Outlook
The IBD Stock Checkup tool shows that Cava stock carries a Composite Rating of 97 out of a best-possible 99. IBD's Composite Rating rolls various fundamental and technical metrics into one easy-to-use score.
The 97 Composite score makes Cava the No. 2 stock in the restaurant retail group, behind Dutch Bros.
Cava holds an EPS Rating of 81 out of a best-possible 99. That score is held back by the fact that Cava is a young company with a short earnings history.
The latest quarterly Cava earnings report, in November, beat expectations on all key metrics, including adjusted EBITDA, revenue, comparable sales and margins. The quarter marked "Cava's strongest traffic gain in a year and a half" amid rising brand awareness, menu innovation and revamped loyalty program, William Blair analyst Sharon Zackfia said.
"Mediterranean is meeting the moment," Cava Group CEO Brett Schulman said during the earnings call.
Cava stock hit all-time highs on the report. It is now more than 20% below that high.
Q4 Results Coming Up
The Mediterranean restaurant chain is set to next report around March 4. On a per-share basis, analysts expect earnings to more than triple in the fourth quarter of 2024, soaring 229%. For the full year, they see Cava earnings more than doubling, up 140%, as revenue surges 32% and same-store-sales grow 13%.
Growth is slowing at solid levels. For 2025, analysts see both Cava earnings and revenue rising 24%.
The Stock Checkup tool shows six quarters of rising mutual fund ownership. Fidelity Contrafund holds nearly a million Cava shares of Cava stock after slightly paring its stake in the September and December quarters.
On Jan. 7, Barclays analyst Jeffrey Bernstein said easing inflation, improving consumer confidence and easier comparisons bode well for the restaurant industry. But he lowered his price target on equal-weight-rated Cava stock from $142 to $127, below where shares closed on Wednesday.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
