Predicting Cava's Position in the Coming Year
In the rearview mirror, we've seen Cava Group's Mediterranean restaurant shares soar, finishing 2024 with a staggering 162% increase. As we gaze into 2025, investors are eager to know what this scorching-hot stock might have in store for them. While I can't gaze into a crystal ball, let's dissect Cava's plans and what they might mean for investors.
Cava's 2025 Plans
Wrapping up 2024, Cava ended the third quarter with 352 locations. The company anticipated adding 13-15 new stores during Q4, presumably bringing the total count to around 366. Cava's CFO, Tricia Tolivar, has set her sights on a 17% expansion in 2025, meaning we could see more than 60 new restaurants popping up this year.
Many of these new locations will be in 'white space,' or fresh markets, where the brand's familiarity is limited. A sparse market means reduced demand, so new locations might not drive back-breaking sales initially.
However, there's some optimism for these new ventures. Cava's brand recognition has increased by 8 points since going public in mid-2023. In established markets, Cava enjoys a 60% brand awareness, but this number is much lower nationwide. An 8 point increase bodes well for Cava's 60+ new restaurants.
The contribution of these new locations along with a slight bump in same-store-sales growth couldputCava's revenue at $1.1 billion in 2025. Cava's management predicts that 2025's restaurant-level profits will remain roughly steady compared to 2024, giving us an operating profit projection of $66 million.
What This Means for Investors
The possibilities are always threefold for a stock - it could get more expensive, it could get cheaper, or the valuation could remain stagnant. Given Cava's booming business and 2025's promising outlook, the gloomy 'cheaper' scenario seems unlikely. Cava's stock trades at 15 times sales, twice that of Chipotle's historical peak, making the 'more expensive' scenario a distant dream.
The 'stay the same' scenario means Cava's stock performance will match its business growth. If the valuation remains unchanged, investors could be looking at a 20% return for Cava stock in 2025.
One crucial caveat to consider is market conditions. If a bear market strikes, shareholders might face challenges, even if Cava's business performs well. It's best to maintain a long-term outlook, as the market tends to rise 10% annually, overriding short-term market swings.
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- Given Cava's expansion plans for 2025, with a predicted addition of over 60 new locations, investors might be interested in factoring this growth into their finance strategies for the stock.
- The expected increase in revenue for Cava in 2025, driven by new store openings and same-store sales growth, could potentially attract more investors interested in investing in the stock market.
- With Cava's CFO targeting a 17% expansion in 2025, some investors may be weighing whether the potential returns from these new locations justify the increased risk associated with investing in 'white space' markets.
- In light of the promising outlook for Cava's stock in 2025, investors may find it beneficial to closely monitor the company's financial performance to decide whether to allocate more money into the stock or potentially consider other investment opportunities.
