Cava Group is Friday's IBD Stock Of The Day as the fast-growing Mediterranean chain launches its first Midwest restaurant in Chicago. Cava, the No. 1 stock in one of the stock market's top-performing groups, raced by a buy point Friday.
Strong results from Chipotle Mexican Grill may be fueling expectations for a strong Q1 from Cava. Cava's own first-quarter earnings are expected around May 29. Texas Roadhouse, Shake Shack and Wingstop are all showing bullish action, but these eateries report next week.
Cava: A Growth And Margin Story
The restaurant chain's Chicago's Wicker Park opening Friday is its 16th of the year. That makes 325 across 25 states and Washington D.C. Cava added 72 restaurants in 2023 and says unit count will grow at least 15% this year and next. The company has its eye on 1,000 restaurants by 2032.
Cava had an initial public offering in June 2023. Fourth-quarter results out in February showed that Cava turned profitable last year, as revenue jumped nearly 60% to $717.1 million. That was driven by restaurant openings plus an 18% gain in same-store sales.
On April 16, Wedbush hiked its price target for Cava Group to 74 from 65, keeping an outperform. The firm said its research indicates above-consensus Q1 same-store-sales growth. Wedbush also likes Cava for the long term, given what it sees as realistic unit growth targets.
A day earlier, Barclays started coverage with an equal weight rating and 58 price target for Cava. Analyst Jeffrey Bernstein touted Cava's industry-leading growth and said its efficient business model can produce attractive margins, but noted its high valuation.
Cava Stock
Cava leapt 10.5% to 69.16 in Friday stock market action in more than double normal volume. That followed Thursday's 3.6% gain, when it reclaimed the 50-day line and closed right at its 21-day exponential average.
On Friday morning, Cava stock cleared a trendline from the April 1 high, triggering an early entry opportunity.
The IBD Leaderboard portfolio of elite stocks added Cava after the restaurant chain had been on its watchlist.
However, with Cava continuing to gain momentum Friday, it is now extended from that entry. Investors should wait and see if the stock pulls back into range or forges a proper base.
Cava is rated No. 1 by IBD Stock Checkup in the Retail-Restaurants industry group that ranks No. 6 out of 197 based on stock performance and momentum. Cava's Relative Strength line is hitting a new high, confirming its market leadership. That's the blue line in IBD charts that tracks a stock's performance vs. the S&P 500.
Other Restaurant Stocks
Chipotle stock rose 2.4% to 3,186.97. Shares soared nearly 16% this week, blowing past a 3,023.98 buy point Thursday following strong earnings. Chipotle, Thursday's IBD Stock Of The Day, is now extended from that entry.
Wingstop stock climbed 3.4% to 382.56, topping a 379 buy point.
Shake Shack rose 3.45% to 104.88, rebounding from the 50-day line. SHAK stock will have a flat base with a 110.90 buy point after Friday's close.
Texas Roadhouse edged up 0.4% to 158.46, just above a 157.12 flat-base buy point.
Wingstop reports next Wednesday, with Shake Shack and Texas Roadhouse due on Thursday. Those upcoming results make any buys much riskier.
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