CAVA Group sits at all-time high ahead of Q1 earnings
- CAVA Group is a Mediterranean food chain that is growing its location base at breakneck speed.
- CAVA Group will release Q1 results after Tuesday's close.
- Wall Street expects $0.05 in adjusted EPS and $245.5 million in revenue.
- This compares with $0.03 in adjusted EPS in Q4 on revenue of $177.2 million.
CAVA Group (CAVA) is trading at an all-time high leading up to its earnings release, which is slated for the post-market on Tuesday, May 28.
Excitement surrounds the first-quarter results of the Mediterranean chain as it rapidly opens new locations throughout the US market. The company opened 90 net new establishments in the fourth quarter and is on pace to open approximately 50 more in 2024.
CAVA stock news
Wall Street is expecting CAVA Group to report $0.05 in adjusted earnings per share on revenue of $245.5 million. This amounts to a 66% quarterly rise for EPS and a 39% quarterly rise on revenue.
The number of net new restaurants will be high on the list of interests for those listening closely to the earnings call led by CEO Brett Schulman. Additionally, traders will focus on restaurant-level profit margin, which rose by 240 basis points to 22.4% of sales in the fourth quarter.
The quarter has received heightened interest as analysts heaped praise on the company since the last earnings call in February. Over the last three months, profit estimates have been revised upward five times, and no downward revisions were seen. Revenue estimates have seen nine upward revisions and one downward.
Argus got the ball rolling back in April when analyst Christine Dooley gave it a Buy rating and slapped a then impressive $70 price target on the recent IPO. Shares closed last Friday before the Memorial Day holiday just below $83 and advanced to $84 afterhours.
The company has a profitable business model, a clean balance sheet and an experienced management team," wrote Dooley at the time.
The main sticking point for buyers is its valuation however. CAVA stock trades at 356 times forward earnings. Dooley insists that these valuations are less significant near the beginning of a young chain’s growth spurt when earnings can shoot up overnight.
Interestingly, when UBS analysts covered the restaurant sector earlier this month, CAVA stock was rated as neutral in terms of momentum.
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CAVA stock forecast
Despite a nearly continuous rally since last October, CAVA stock sits just beneath the overbought condition on the Relative Strength Index (RSI) at 68. The Moving Average Convergence Divergence (MACD) indicator tells us that a bearish turnover is at hand, although an earnings spike would take that possibility off the table.
CAVA stock has been riding the 12-day Exponential Moving Average (EMA) for much of its recent run, but the 60-day EMA rode to the rescue during April's pullback.
If earnings turn out lacklustre, expect CAVA to find its footing near the 60-day EMA near $67. If earnings arrive better than expected, then CAVA could easily meet the low $90s for the first time.
CAVA daily stock chart
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Author
Clay Webster
FXStreet
Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.
