Investing.com -- Bernstein upgraded shares of Cava Group to “Outperform,” saying the recent selloff has improved the stock’s risk-reward profile while the company remains well-positioned for growth despite broader economic uncertainty.
Cava shares are down about 30% year-to-date, but Bernstein said there has been no material deterioration” in the company’s long-term fundamentals and sees upside ahead of its first-quarter earnings report.
We believe the market is overly discounting near-term risks while under-valuing the long-term growth story, analysts wrote, maintaining a price target of $115.
Cava’s cautious guidance for 6-8% same-store sales growth in 2025 leaves room for upside, and recent sales data suggest the potential to exceed 10%.
The company’s relatively affluent customer base and history of disciplined pricing could insulate it from a potential downturn.
Bernstein says margins of the company remain healthy, and Cava is expected to support 15-18% unit growth in 2026 despite cost pressures.
The analysts noted that Cava has “underpriced CPI by 800 basis points” over the past several years, boosting its value perception.
Analysts also pointed to Cava’s limited reliance on imports and strong cash-on-cash returns as buffers against tariff-related risks.
Bernstein said the market’s treatment of Cava resembles the multiple compression seen in peers like Chipotle (NYSE:CMG) and Panera during the financial crisis, despite Cava’s “long-term compounding opportunity staying intact.”
The firm values Cava using a 20-year discounted cash flow model, with projected free cash flow growth of 21-22% and a WACC of 9.6%.
