Topline
Cava shares surged again Thursday to a fresh all-time high, making the burgeoning Mediterranean fast-casual chain one of the most valuable restaurant groups in the world and drumming up dreams that it could follow Chipotle’s growth trajectory.
Key Facts
Cava stock opened at an all-time high of $54.68 Thursday before tumbling nearly 5% in morning trading.
Shares of the chain are still up 120% from their June 15 public offering price of $22, a success story for one of the first major companies to go public over the last 18 months amid a tepid macroeconomic backdrop.
The chain, which counts 263 locations, is now valued at $5.6 billion, making it the eighth-most valuable American restaurant chain, topping more established names such as Wendy’s, Papa John’s and Bloomin’ Brands.
Cava, which brought in $449 million of revenue last year, actually lost $59 million in 2022, but it’s already a hit on Wall Street, as analysts compare the company to Chipotle, whose stock has soared almost 5,000% from its 2006 IPO, growing from below 600 to more than 3,000 locations during that period.
In a note initiating coverage of Cava with a buy rating, Jefferies analyst Andy Barish said Cava’s “blue-sky scenario” would be to match Chipotle’s goal and eventually open 7,000 restaurants in North America – a roughly 2,500% expansion.
Chief Critic
Cava is a “terrible business…burning cash flow” who went public “to keep from going bankrupt,” David Trainer, the CEO of investment research firm New Constructs, told Yahoo Finance earlier this week. Trainer compared Cava’s IPO to that of WeWork, the shared office space firm whose shares are down more than 95% since going public three years ago.
What To Watch For
Whether more companies follow Cava into going public. After a record year for IPOs in 2021, the market went nearly silent save for high-profile names like LGBTQ+ dating app Grindr and the Intel-backed autonomous vehicle company Mobileye. The water brand Liquid Death hired Goldman Sachs to explore an IPO of its own, according to the Information.
Crucial Quote
“This is not the destination, it’s the beginning of the next chapter of our journey,” Cava CEO Brett Schulman told Forbes on his company’s first day of trading. Schulman owns 2.4% of the company, a stake that’s exploded from $57 million to $136 million over the last month, according to FactSet data.
Tangent
Though rapidly growing, Cava’s revenues are still dwarfed by the chain’s less valuable but more established rivals. Wendy’s, for example, pulled in $2.1 billion in sales and $177 million in profit across its 6,500 locations last year.
Fast-Casual Restaurant Chain Cava Soars Past IPO Target Price In First Day Of Trading (Forbes)
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