Analyst predicts Cava shares could rise 41% after upgrade

On April 23, 2025, Bernstein analyst Danilo Gargiulo upgraded Cava Group's stock rating from market perform to outperform, indicating a strong belief in the company's potential despite recent market volatility. Cava, a fast-casual restaurant chain that went public in 2023, has experienced a significant decline of around 28% in its share value this year, prompting Gargiulo's assessment that the market may be overly pessimistic about the company's prospects. The analyst set a price target of $115 for Cava shares, suggesting an upside potential of approximately 41.5% based on Tuesday's closing prices. Gargiulo noted that the recent pullback in Cava shares might be an overreaction to near-term risks, as investors appear to be discounting the long-term growth narrative that the business has cultivated. He emphasized that Cava's stock could face further short-term volatility as market participants search for a price bottom. Despite these market uncertainties, Gargiulo highlighted that Cava's financial health is strong, with healthy margins and returns, backing an optimistic outlook for the company's future performance. With robust year-to-date sales and a projected same-store sales growth rate of 6% to 8%, Cava stands out as a resilient player in the fast-casual dining sector. Gargiulo pointed out that this strength can be attributed to the company's target demographic of higher-income customers and its disciplined pricing strategies, which could protect it during economic downturns. Historically, fast-casual chains have shown better performance relative to the broader market during recessions, suggesting that Cava may be less susceptible to market fluctuations compared to other consumer companies. Looking ahead, Gargiulo estimated that Cava could achieve annual unit growth between 15% and 18% by 2026. This projection further solidifies Bernstein's positive stance on Cava's growth potential, even in a challenging economic landscape where many businesses may be forced to adjust their guidance due to uncertainty. Gargiulo expressed confidence that Cava is poised to navigate the coming years while continuing to perform effectively in the competitive fast-casual segment.