CAVA Group (NYSE: CAVA) stock price just gone vertical and is slowly approaching its all-time high after the spectacular Chipotle Mexican Grill (CMG) earnings. It jumped to a high of $70, a few points below its all-time high of $71.40.
CAVA shares jumped after the latest Chipotle results, indicating a strong recovery of the casual dining industry. As a result, CMG stock soared to a record high of $3,185, much higher than last year’s low of $1,350.
In a statement, Chipotle said that its first-quarter revenues jumped by 14.1% to $2.7 billion. Its comparable restaurant sales rose by 7% while its operating margins grew, reaching 16.3%. As a result, the management believes that it can double its business in the next few years.
CAVA Group vs Chipotle
Chipotle is significantly different from CAVA in that it sells Mexican food while it deals with Mediterranean foods. However, as I wrote recently, analysts and investors believe that the company can mirror Chipotle’s growth.
CAVA is already seeing strong growth. Its annual revenue in 2023 stood at over $728 million, up from $564 million a year earlier. That happened as the company opened 72 stores during the year.
Like Chipotle, CAVA has grown its digital sales in the past few years. Total digital sales stood at 36% in 2023, a figure that is similar to Chipotle. The management believes that it can get this figure to over 40% in the next few quarters.
Analysts believe that CAVA Group’s revenue growth will accelerate in the coming years. The average target is that it will grow to $873 million this year, up from $728 million in 2023. It will then cross the crucial $1 billion figure in 2025.
I believe that CAVA Group can double its store count in the next few years, a move that will bring the total to about 600. Still, the key risk for investing in CAVA is that it is still severely overvalued since it has a forward PE ratio of 261, which is substantial.
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