Is It Possible to Become a Multi-Millionaire with Cava Stock?

Cava (NYSE: CAVA) is now attracting investors after a lackluster three months after its June 2023 IPO. As of March 19, Mediterranean-focused restaurant chain shares are up 51% year-to-date. It outperforms the S&P 500 by a lot.

It convinces naysayers, but enthusiastic investors hope for brighter times. Can this hot new restaurant stock make you rich? Before answering that question, I recommend looking at this business from both short- and long-term perspectives.

The fast-casual Cava serves healthful options including build-your-own pitas and bowls and is popular with customers. No doubt, the company is growing. It opened 72 net new locations in 2023, reaching 309. This boosted sales by 59.8%. Finally profitable after a $59 million net deficit in 2022, the corporation earned $13 million last year. Operating expenses climbed 16% in 2023, slower than revenue, explaining the improved bottom line.

Investors want to compare Cava to Chipotle Mexican Grill due to its strong financial results. The Tex-Mex chain is rapidly opening shops and increasing sales and profitability. The leadership team still sees significant long-term potential. Cava wants to dominate like Chipotle. Cava's management has expressed their goal of 1,000 stores by 2032. Over eight years, the store count will triple.

I think accomplishing the long-term store aim is uncertain. With low entry barriers and shifting consumer tastes, the restaurant business is undoubtedly the most competitive. According to the National Restaurant Association, 30% of new restaurants fail in their first year.

Cava lacks the scalability to compete with other huge U.S. restaurant chains. Thus, the company will have to compete with wealthy rivals for hiring, food, and real estate, all of which are subject to inflation.

Estimating built-in expectations In 2024, shares reach record highs. Cava's optimism appears to be factored in. The stock has a staggering 681 P/E ratio. More proven but growth-focused Chipotle sells at a 63 P/E multiple, which is costly but less steep.

Investors get what at that valuation? Cava's management expects 50 mid-year shop openings in 2024, slower than last year. Executives expect same-store sales to climb 3%–5% this year. Again, a significant slowdown from 2023. This doesn't justify a high P/E.

If Cava meets its long-term goals, the stock might make investors billionaires. Of course, the initial capital outlay, time horizon, and stock valuation multiple, which will decrease with time, will all matter.

stay turned for development