On Wednesday, Loop Capital updated its financial outlook on CAVA Group Inc (NYSE:CAVA) shares, raising the price target to $80 from the previous $53, while keeping a Hold rating on the stock.
The adjustment follows CAVA's impressive first-quarter performance, which saw a significant EBITDA beat and robust comparable sales figures.
CAVA Group reported an adjusted EBITDA of $33.3 million in the first quarter of 2024, doubling from $16.7 million in the same period last year. This figure surpassed both Loop Capital's estimate of $26.3 million and the consensus of $23.2 million.
Earnings per share (EPS) for the quarter also exceeded expectations, coming in at $0.12 compared to the forecasted $0.09 and well above the consensus estimate of $0.03.
The company's comparable sales growth stood at 2.3% for the quarter, which included a 3.5% increase in ticket prices, although this was slightly offset by a 1.2% decline in traffic.
Nonetheless, these numbers were favorable when compared to Loop Capital's forecast of flat growth and the consensus estimate of a 0.2% increase.
CAVA's consolidated revenues for the first quarter surged by 30% year-over-year to $259 million. This revenue figure also topped Loop Capital's estimate of $226 million and the consensus of $244 million.
The strong financial results have led to the revised price target, which is now based on approximately 75 times the firm's revised 2025 EV/EBITDA estimate.
The firm's decision to maintain a Hold rating despite the price target increase reflects a valuation perspective. Loop Capital's stance remains cautious, considering the current market value of CAVA Group's shares.
InvestingPro Insights
In light of CAVA Group Inc's robust first-quarter performance, a deeper dive into the company's financial health using InvestingPro's real-time data and tools offers additional insights. With a market capitalization of $9.39 billion and a striking revenue growth of 29.17% in the last twelve months as of Q1 2024, CAVA is showing a strong expansion trajectory. This growth is further underscored by the company's impressive 36.35% quarterly revenue growth in Q1 2024. Additionally, CAVA's gross profit margin of 37.0% indicates a solid capability to translate sales into profitability.
InvestingPro Tips highlight CAVA's high earnings multiple, with a P/E ratio of 276.05, suggesting that investors are willing to pay a premium for potential future growth. Moreover, the company has demonstrated a strong return over the last year, with a 1 Year Price Total Return of 88.21%, reflecting investor confidence in its performance. It's also worth mentioning that CAVA's liquid assets exceed its short-term obligations, providing financial flexibility and stability.
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