CAVA Group (NYSE: $CAVA) is a fast-casual restaurant chain that focuses on Mediterranean-style cuisine with locations across the US. It offers diners healthful food with bold, satisfying flavors through CAVA restaurants and Zoës Kitchen.
On May 28, after markets closed, CAVA Group released its earnings results for Q1 fiscal 2024 to a positive market reception after topping estimates on the top and bottom lines.
CAVA Group Releases Q1 Results
In the first quarter, CAVA Group reported revenue of $256.3 million, representing a 30.3% Y/Y increase and above estimates of $245.9 million. It reported a net income of $13.99 million, a major improvement from a net loss of $2.14 million in Q123, for an EPS of $0.12, beating estimates of $0.046.
In the quarter, the fast-casual restaurant chain opened 14 new locations, bringing the total CAVA restaurants to 323, a 22.8% increase from last year. Same-store sales grew 2.3%, while the CAVA AUV grew to $2.6 million compared to $2.5 million last year.
Other Financial Highlights
For the first quarter, CAVA Group reported a restaurant-level profit of $64.6 million, a 29.3% increase Y/Y for a Restaurant-Level Profit Margin of 25.2% compared to 25.4% the previous year, driven by incremental wage investments, and partially offset by lower beverage, food, and packaging costs.
It reported a digital revenue mix of 37%, while adjusted EBITDA rose 99% Y/Y to $33.3 million compared to $16.7 million for an adjusted EBITDA margin of 12.9%. CAVA Group reported a net profit margin of 5.4%.
It ended the first quarter with $38.4 million in net cash from operations and a free cash flow of $4.7 million.
CAVA Group Revises Full-Year Guidance
For fiscal 2024, CAVA Group now expects to open 50 to 54 restaurants, up from the previous forecast of 48 to 52. It expects same-store sales to grow 4.5% to 6.5%, up from its previous forecast of 3.0% to 5.0%.
The fast restaurant chain now expects a restaurant-level profit margin of 23.7% to 24.3%, an increase from the previous forecast of 22.7% to 23.3%. it expects pre-opening costs of $12.0 to $13.0 million, up from the previous forecast of $11.5 to $12.5 million. Additionally, it revised its full-year EBITDA forecast to $100.0 to $105.0 million from the previous forecast of $86.0 to $92.0 million.
CAVA Group (CAVA) Stock Performance
Following the stellar Q1 results, CAVA rose 5.56% to $86.99 as of 02:19 PM EDT on Wednesday. Since the CAVA IPO in June 2023, the shares have gained 120.18%, recently hitting a new all-time high of $86.25.
The stock valuation of 333.33 of forward earnings has led to worries among some investors, as is evident in the 10.15% short interest in the shares outstanding and 15.37% of the floating shares. Over the past month, the short interest has increased by 1.22% from 11.43 million shares to 11.57 million shares as of May 15, 2024.
Analysts’ Outlook on CAVA
Eleven stock analysts give CAVA an overall moderate buy rating. They forecast a wide range for the stock in the next 12 months, with a high of $94 and a low of $58. Their average forecast of $81.27 is a 4.39% downside based on the most recent price.
Should You Add CAVA To Your Portfolio In 2024?
CAVA Group is a fast-rising company that has seen its valuation increase by over 100% since going public in June 2023. However, some analysts have argued that its high valuation of 333.33 of forward earnings compared to 30.58 for Texas Roadhouse and 20.53 for McDonald’s could lead to a price correction.
However, CAVA is still growing, and its near-term forecast looks promising. Analysts have also pointed out that its business model is profitable, it has a clean balance sheet, and management has a wealth of experience. To justify its lofty valuation, CAVA Group will need to maintain its growth momentum, which makes it a potentially great choice for investors looking to gain exposure to the restaurant industry.
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