Cava (NYSE: CAVA) is a fast-casual restaurant brand with increasing sales and, according to Argus analyst Christine Dooley, plans to keep expanding for a long time. Cava was given a $70 price objective and an upgrade to "buy" by Dooley on Wednesday. An increase of around 16% is possible at that price target.
explosion in popularity The fourth quarter of 2023 was a banner one for Cava, with same-restaurant sales increasing by 11.4%. This contributed to a 36% increase in overall sales, with a 53% increase at Cava locations (the difference being due to the conversion of Zoe's Kitchen locations).
With the addition of 19 sites in the last quarter, the company's total number of restaurants reached 309. The company's goals for 2024 include increasing the number of restaurants by 48 to 52 spots and achieving same-restaurant sales growth of 3 to 5 percent.
Valuation is the crux of Dooley's buy thesis. In comparison to fast-casual behemoth Chipotle, the analyst thinks Cava's stock is inexpensive and is hopeful about the company's long-term growth prospects.
Cava stock is worth buying? The fact that Cava stock is cheaper than Chipotle stock doesn't really mean much. Cava is trading at a price that is close to 8 times revenues and 260 times earnings, according to analysts' expectations for 2024.
Will Cava replace Chipotle? It is practically necessary for the appraisal to be reasonable. Considering the pioneer in the sector was established over 30 years ago,
the issue with this assumption is that no one has emerged as a genuine successor to Chipotle. Few new fast-casual companies have been able to maintain their meteoric rise for more than a few years.
Investors shouldn't rule out the chance that Cava runs into problems long before it reaches Chipotle's size, just because the firm is unique.
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