Cava Restaurant Chain Hits Record High

By Savyata Mishra
(Reuters) – Restaurant chain Cava reached a new record high with its shares rising over 16% to $167.50 in early trading on Wednesday, after surpassing quarterly earnings estimates driven by strong demand for its pita chips and premium grilled steaks.

The company increased its annual forecasts for the third time in 2024 after market close on Tuesday, and its stock has more than tripled in value this year.

Fast-casual restaurants like Cava, Shake Shack (NYSE:SHAK), and Chipotle (NYSE:CMG) have gained popularity as consumers shift from fast food amidst rising prices.

TD Cowen analyst Andrew Charles noted that "Cava also continues to benefit from the consumer preference shift from quick service to fast casual as middle-income consumers increasingly view fast casual as a better value for money."

Cava experienced a 28.4% growth in traffic this year until September, while competitors McDonald's (NYSE:MCD) and Restaurant Brands-owned Burger King saw declines of 0.4% and 0.9%, respectively, according to data from Placer.ai.

After the earnings results, at least six brokerages adjusted their price targets for Cava's stock, with Stifel raising it from $118 to $175.

Stifel analyst Chris O'Cull stated, "In our view, the stock's lofty valuation can be justified by its unit growth opportunity and the potential for solid operating momentum."

Cava's revamped loyalty program, launched in early October, contributed 200 basis points to sales in the reported quarter. The company reported a 18.1% increase in same-restaurant sales, attributed to a 12.9% rise in guest traffic and a 5.2% lift from menu prices and product mixes.

CEO Brett Schulman expressed, "CAVA is at a clear tipping point as the leader of fast-casual Mediterranean" during a post-earnings call.

Following its expansion into Chicago, Cava plans to enter South Florida early next year and expand its Midwest presence with at least two additional markets in 2025.

Cava's forward price-to-earnings ratio for the next 12 months stands at 283.86, in contrast to 117.80 for Shake Shack and 46.69 for Chipotle.