Cava Group Inc. (NYSE CAVA), chief executive Brett Schulman, expects the stock price of the company to continue to rise as long as the team “keeps its head down and focuses on the mission to bring health, heart, and humanity to the food”.
Shares of Cava, a Mediterranean fast-casual chain of restaurants, are already 300% higher than they were in 2024. Schulman expects this momentum to continue when Cava achieves its goal of opening 1,000 restaurants by the year 2032.
This translates into a compound annualized growth rate of about 15%.
The chief executive of CNBC’s Squawk Box said that “this year, we were able to surpass that and we gave a preliminary guidance for next years of 17% plus due to the strength of our pipeline of real estate”, on Wednesday.
Cava stock gains after strong Q3 earnings
Cava Group’s third financial quarter came in well above Street expectations, thanks to an 18% increase in same-store sales from Wednesday.
The fast-casual chain is expecting traffic to remain high as it continues to open restaurants in “suburban shopping centers, exurban small towns, college adjacent sites, or urban locations with residential areas.”
In his interview with CNBC, CEO Brett Schulman said that Cava has made aggressive investment in technology and infrastructure in order to become a “category-defining” brand. It is in many ways creating the next major culinary category in the Mediterranean.
The New York-listed company ended its third quarter with over $23 millions in free cash flow.
Cava does not issue a dividend.
Cava can withstand inflationary forces
Cava Group was able to increase its restaurant margins at a time when the inflation rate in the fast food category was double digits.
Brett Schulman, CEO of the company, predicts that food, beverage and packaging will continue to experience inflation in the single-digit range. The company has a pricing elasticity, but “we are not necessarily looking to take advantage of it just because we’re able.”
Schulman was upbeat when he discussed quarterly results with CNBC. This is because Cava has a commitment to both its physical footprint and digital channels. The chief executive called this approach the right one for driving continued growth in the future.
Cava Group generated approximately 34% of its total revenue in the third-quarter from its digital channels, and 64% from physical locations.
Is it too Late to Invest in Cava Shares?
Cava stock is currently trading at a premium both in terms of sales and earnings.
Wall Street shares the optimism of the CEO Brett Schulman, and is comfortable with a lofty valuation based on a steadily improving bottom-line.
The Street-high price of $180 and the consensus rating of “overweight” on CAVA indicate that there is potential for a further 12% gain from here.
This post Cava Stock: What could drive future gains following a 300% rally year-to date? This post may be updated as new information becomes available
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