Stock Story -
What Happened: Shares of casual salad chain Sweetgreen (NYSE:SG) jumped 8.4% in the morning session after Oppenheimer analyst reaffirmed the stock as one of its "Top Picks." The stock has more than doubled (+132%) this year and continued to attract positive coverage from Wall Street analysts.
Earlier in the month (July 17, 2024), UBS initiated coverage on Sweetgreen with a Buy rating and a $31 price target. The analyst said, "While shares are still up significantly YTD, we rate shares Buy as we believe: i) SG is approaching an inflection in EBITDA profitability, ii) visibility is increasing into drivers of sustainable sss momentum & unit growth, and iii) sizable earnings upside potential exists from the rollout of Infinite Kitchens (automated store formats) & benefits to consensus margins." After the initial pop the shares cooled down to $25.58, up 4.8% from previous close.
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What is the market telling us: Sweetgreen's shares are quite volatile and over the last year have had 54 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock gained 44.6% on the news that the company reported first-quarter earnings results. Sweetgreen blew past analysts' revenue expectations this quarter as its same-store sales grew 5%, enabling it to raise its full-year revenue guidance. Its gross margin also outperformed Wall Street's estimates. On the other hand, its EPS missed analysts' expectations, but the market cares more about its upbeat outlook. Overall, we think this was a good quarter that should please shareholders.
Sweetgreen is up 131% since the beginning of the year, but at $25.58 per share it is still trading 26.9% below its 52-week high of $34.98 from June 2024. Investors who bought $1,000 worth of Sweetgreen's shares at the IPO in November 2021 would now be looking at an investment worth $517.23.
