TLDR
- CAVA stock has declined more than 30% since its August 12 earnings report, trading near its 52-week low of $58.53
- Jefferies maintains its Buy rating and $100 price target, calling the pullback an attractive buying opportunity
- The company’s COO Jennifer Somers departed last week, with SVP Jonathan Braatvedt temporarily taking over operations
- Analysts point to Gen Z spending pressures from resumed student loan payments and rising unemployment as key factors
- Retail investors on Stocktwits shifted to “extremely bullish” sentiment, viewing the drop as oversold
CAVA stock closed at $58.76 on Monday after dropping 6% in the previous session. The Mediterranean fast-casual chain has lost nearly half its value year-to-date.
Jefferies reaffirmed its Buy rating on Tuesday despite the selloff. The investment firm set a $100 price target on the stock, suggesting upside of over 70% from current levels.
The decline has been driven primarily by same-store sales concerns that emerged in August. CAVA cut its annual same-store sales growth target for the first time since going public in 2023.
The company reported same-store sales growth of just 2.1% in the second quarter. This fell well short of the 6% consensus expectation from analysts.
Multiple Wall Street firms have since adjusted their price targets. CFRA lowered its target to $120, while Bernstein SocGen and Piper Sandler both moved to $100. TD Cowen set the lowest target at $90.
Jefferies argues the pessimism is overdone. The firm expects same-store sales to improve through 2026 and beyond as current headwinds ease.
The analyst highlighted CAVA’s fundamentals beyond comparable sales. The company generated $125.91 million in EBITDA over the last twelve months with revenue growth of 28.21%.
Leadership Change Adds to Uncertainty
CAVA announced on Friday that COO Jennifer Somers had left the company. Jonathan Braatvedt, the senior vice president of operations, assumed her duties on an interim basis.
The timing of the departure raised eyebrows given the stock’s recent struggles. No specific reason was provided for Somers’ exit from the Mediterranean chain.
Retail investors on Stocktwits appeared unfazed by the news. Sentiment on the platform shifted to “extremely bullish” on Tuesday morning.
Several users described the decline as a “stop loss raid” and “manipulation.” One trader said they had “loaded” shares at what they viewed as an oversold level.
Gen Z Spending Pressures Weigh on Fast-Casual Sector
Benchmark analyst Todd Brooks pointed to broader demographic trends hurting the fast-casual space. Gen Z consumers are visiting restaurants like CAVA, Chipotle, and Sweetgreen less frequently.
The resumption of federal student loan payments in May has squeezed younger diners’ budgets. Brooks also cited rising unemployment among recent college graduates.
The unemployment rate for recent college graduates climbed to 5.8% in March. That represents a jump from 4.1% a year earlier.
These factors have created headwinds across the Mediterranean and fast-casual categories. CAVA has not been immune to the broader spending slowdown.
Jefferies sees the company’s 15% unit growth rate as a source of potential upside. The firm believes CAVA has room to accelerate expansion over time.
The chain continues opening new locations across the United States. Its customizable bowls, pitas, and salads have attracted health-conscious diners in major markets.
CAVA’s market cap stood at $6.8 billion as of Monday’s close. The company trades at what Jefferies’ data indicates are oversold conditions based on technical indicators.
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