Is Sweetgreen's 83% Price Collapse a Value Trap or a Buying Opportunity?

The stock market's most compelling narratives often emerge from dramatic price swings. Sweetgreen (NYSE: SG), the fast-casual salad chain, has experienced an 83% collapse in its stock price since peaking in 2023, driven by a combination of operational missteps, shifting consumer preferences, and a broader economic slowdown. For contrarian value investors, the question is whether this represents a value trap-a misleadingly low price masking fundamental decay-or a buying opportunity for a company with untapped potential.

The Case for a Value Trap

Sweetgreen's Q3 2025 results underscore a dire financial reality. The company reported an adjusted EPS of -$0.31, far below the estimated -$0.18, and revenue of $172.4 million, missing the $179.36 million forecast, according to an earnings call transcript. Same-store sales plummeted 9.5% year-over-year, driven by an 11.7% drop in customer traffic, according to the same transcript. Analysts, including Goldman Sachs and Piper Sandler, have downgraded the stock to "Sell" or "Market Outperform," citing a lack of operational execution and a failure to reverse declining consumer demand, per the transcript.

The company's decision to sell its Spyce automation division for $186.4 million-while framed as a liquidity boost-has raised questions about its long-term innovation strategy. Critics argue that divesting core technology signals a retreat from the competitive edge that once defined Sweetgreen, according to the transcript. Additionally, the company's market capitalization of $764.8 million as of November 6, 2025, reflects a steep discount to its 2023 valuation, but this discount may not account for structural challenges in the fast-casual dining sector, including price sensitivity among younger consumers and rising labor and ingredient costs, according to a Markets article.

Contrarian Catalysts: Protein Innovation and Digital Engagement

Despite these headwinds, Sweetgreen has introduced a novel tool that could reignite customer engagement: a macronutrient tracking feature across its digital platforms. This tool allows customers to adjust ingredient swaps and track protein, carbohydrate, and fat content in real time, aligning with the "protein era" trend in health-conscious dining, according to a Nasdaq press release. By offering nine made-from-scratch menu items with 30 grams of protein or more, Sweetgreen is positioning itself to capture a segment of consumers prioritizing nutrient-dense meals, per the Nasdaq press release.

The innovation is part of a broader strategy to enhance digital engagement, which accounts for 61.8% of revenue, according to a Crain's article. While same-store sales remain in freefall, digital sales could serve as a lifeline if the macro-tracking tool drives repeat purchases. Early data suggests mixed results: over the past six months, same-store sales declined 7.6% in Q2 2025, according to the Crain's article, but the company has also cut 10% of its support center workforce to reduce costs, per a Restaurant Business article.

Citi's Government-Reopening Thesis: A Contrarian Lens

Citi's downgrade of Sweetgreen in 2025 reflects a broader skepticism about the company's ability to capitalize on post-pandemic reopening dynamics. The firm's analysis highlights leadership instability-Sweetgreen spent much of 2023 without a chief operating officer-and a lack of profitability under CEO Jonathan Neman, who has yet to deliver a single profitable quarter since the company's 2021 IPO, according to the Crain's article. However, Citi's government-reopening thesis also acknowledges that Sweetgreen's strategic shifts, such as the Spyce sale and focus on automation, could eventually stabilize its balance sheet, according to a Seeking Alpha article.

The firm's contrarian value thesis hinges on the idea that Sweetgreen's current valuation discounts future growth potential. For instance, the company's "Sweet Growth Transformation Plan" aims to improve peak-hour throughput and reduce unit economics, with 2026 expansion plans targeting 15–20 new locations-half of the 2025 pace, according to the Seeking Alpha article. If these efforts succeed, the market may reassess Sweetgreen's enterprise value of $764.8 million, which currently trades at a steep discount to its 2023 enterprise value of $6.2 billion, per the Markets article.

Enterprise Value vs. Growth: A Tug-of-War

The debate between enterprise value and growth potential is central to evaluating Sweetgreen. On one hand, the company's EV is arguably undervalued given its $186.4 million liquidity infusion from the Spyce sale and its plans to deploy Infinite Kitchen technology through a licensing agreement with Wonder, per the Seeking Alpha article. On the other hand, the company's financial discipline-such as slowing new store openings and cutting costs-may limit near-term growth.

A key metric to watch is restaurant-level profit margins, which compressed to 13.1% in Q3 2025 from 20.1% in 2024, according to the Crain's article. If Sweetgreen can stabilize these margins through cost controls and menu pricing, the stock could see a rebound. However, the company's adjusted EBITDA turned negative at -$4.4 million in Q3, compared to $6.8 million in 2024, according to the Crain's article, suggesting that profitability remains elusive.

Conclusion: A High-Risk, High-Reward Proposition

Sweetgreen's 83% price collapse is a double-edged sword. For value investors, the stock's depressed valuation offers a chance to bet on a turnaround driven by protein innovation, digital engagement, and cost discipline. However, the risks are significant: declining same-store sales, leadership instability, and a saturated fast-casual market could prolong the downturn.

Citi's government-reopening thesis suggests that the company's current challenges are not insurmountable, but success will depend on executing its transformation plan and regaining consumer trust. For now, the stock remains a speculative play, best suited for investors with a long-term horizon and a tolerance for volatility.