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The 43% Drop: Is Cava Group (CAVA) a 20-Year Growth Gem or a Recipe for Disaster?

Julian WestSunday, Apr 20, 2025 10:22 am ET
29min read

Cava Group (CAVA) has seen its stock price plummet 43% from its peak, sparking debates about whether this Mediterranean fast-casual chain is a bargain at current levels—or a risky bet for long-term investors. The question is urgent: Should you buy CAVA now, ride the growth wave, and hold it for two decades? Let’s dissect the data.

The Case for Buying CAVA: Growth, Momentum, and Ambition

Cava’s fundamentals are undeniably strong. In fiscal 2024 (ending December 2024), the company delivered 35.1% revenue growth to $954 million, fueled by 13.4% same-store sales growth and a 25% restaurant-level profit margin. Its fiscal 2025 outlook is equally bullish: management targets 6%–8% same-store sales growth, $150 million+ in adjusted EBITDA, and the opening of 62–66 new locations this year alone. By 2032, CAVA aims to surpass 1,000 restaurants, up from 367 today.

CAVA Trend

This trajectory aligns with broader trends in the Mediterranean fast-casual sector, which is projected to grow at a 3% CAGR through 2025, driven by demand for customizable, health-conscious dining. Competitors like SAJJ and The Great Greek are also expanding, but CAVA’s early-mover advantage and unit economics ($2.9 million average restaurant sales) suggest it can scale profitably.

The Risks: Valuation, Competition, and Execution

Yet CAVA’s 43% decline isn’t arbitrary. The stock trades at a price-to-sales ratio of 10.6, implying a 50x+ multiple on projected 2030 profits, which is far higher than the average for restaurant stocks. While growth is strong, it’s not without headwinds:

  1. Valuation Overhang: CAVA’s $10 billion market cap assumes flawless execution. A misstep in same-store sales growth or margin compression could send shares reeling.
  2. Competitive Pressure: Mediterranean cuisine’s popularity has attracted competitors, and CAVA’s menu isn’t immune to copycats. Its 2025 same-store sales target (6%–8%) is a marked slowdown from 2024’s 13.4%, hinting at saturation risks.
  3. Supply Chain and Labor Costs: Expanding to 1,000+ stores will strain supply chains and labor markets. Rising input costs (e.g., for grilled steak) and wage pressures could eat into margins.

Market Context: Mediterranean Dining’s Golden Age?

The Mediterranean fast-casual segment is thriving. The Great Greek Mediterranean Grill, for example, grew systemwide sales by 46% in 2024 while expanding into Canada and Egypt. CAVA’s focus on customizable bowls, digital ordering, and loyalty programs positions it well against rivals like Chipotle (CMG) and Wingstop (WING), which often rely on slower growth models.

WING, CAVA, CMG Total Revenue

However, the sector’s success depends on sustained consumer interest. Mediterranean cuisine’s appeal hinges on its “healthy” image and global flavors—both of which could wane over time.

The 20-Year Horizon: Is This a Buy-and-Forget Stock?

For a 20-year hold, CAVA must survive two decades of economic cycles, shifting tastes, and operational challenges. Here’s what investors need to believe:
- Mediterranean Cuisine Remains Hot: CAVA’s growth relies on sustained demand for its menu, which has no obvious expiration date compared to trends like avocado toast.
- Unit Economics Stay Strong: Its 25% restaurant-level margins must hold as it scales.
- Expansion Doesn’t Sacrifice Quality: Opening 60+ stores annually requires flawless supply chain management and brand consistency.

Conclusion: A Risky, but Potentially Rewarding Bet

Cava Group is a high-risk, high-reward proposition. The stock’s 43% decline creates a buying opportunity for investors who believe in its long-term potential—but only if they can stomach volatility and overvaluation risks.

Key Data Points Supporting a “Hold” for 20 Years:
- Revenue Growth: 35% in 2024 vs. peers’ low-single-digit growth.
- Unit Economics: $2.9 million average restaurant sales vs. Chipotle’s $4.3 million, suggesting room to grow.
- Market Opportunity: Mediterranean restaurants account for only 10% of the U.S. fast-casual market, leaving space for expansion.

Red Flags:
- Valuation: 50x+ forward P/E multiples are a stretch for a company not yet profitable on a consistent basis.
- Execution: 62–66 new stores in 2025 require flawless execution, which is far from guaranteed.

In short, CAVA could be a generational winner if it meets its 2032 goal of 1,000 stores and sustains margins. But if growth stalls or costs rise, this stock could remain a laggard. For buy-and-hold investors with a 20-year horizon, allocate a small portion of your portfolio to CAVA—say 2–5%—and set strict exit rules if margins deteriorate or same-store sales fall below 5% growth.

The Mediterranean wave is rising, but only the strongest brands will stay afloat for decades. CAVA has the tools, but the journey won’t be smooth.

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hey_its_meeee
04/20
CAVA's growth is 🔥 but valuation is sus.
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InjuryIll2998
04/20
CAVA's growth is 🔥, but that valuation is a heavy burden. Watch out for margin compression, folks.
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HJForsythe
04/20
Mediterranean market's golden, but competition's heating up.
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Revolutionary-Slip48
04/20
@HJForsythe What do you think about CAVA's growth strategy?
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Intelligent-Snow-930
04/20
@HJForsythe Competition's fierce, but CAVA's got potential.
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CommonEar474
04/20
Chipotle and WINGstop better watch out; CAVA's scaling fast and eating their lunch in the mediterranean space.
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Groomsi
04/20
@CommonEar474 Think CAVA can hit 1k stores by 2032?
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Euro347
04/20
@CommonEar474 Totally agree, CAVA's on fire.
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SISU-MO
04/20
Supply chain and labor costs could be the Achilles' heel for CAVA's expansion plans. Keep an eye on those metrics.
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TheOSU87
04/20
Hold CAVA long-term? Risky, but potential's there.
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Scuczu2
04/20
@TheOSU87 How long you planning to hold CAVA? 20 years is a long bet, what's your target?
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rvnmsn
04/20
CAVA's growth is 🔥, but that valuation is a wild ride. Risky bet, but could be a big payoff.
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Sgsfsf
04/20
43% drop? Sounds like a panic sale. If they hit 1k stores by 2032, this could be a gem.
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Medical-Truth-3248
04/20
Mediterranean market's got legs, but CAVA's execution risk keeps me cautious. Not a buy-and-forget situation.
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ultrapcb
04/20
43% drop? Looks like a sale on a future winner. I'm in for the long haul, but watching margins closely.
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Ou_deis
04/20
@ultrapcb How long you planning to hold CAVA? You thinking 5 years or till 2032?
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crentony
04/20
$CAVA dip = buying opp? Not for faint-hearted
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S_H_R_O_O_M_S999
04/20
CAVA's unit economics are solid, but can they maintain that margin as they scale? 🤔
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SomeSortOfBrit
04/20
CAVA's margins must hold; supply chain's key.
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Monkiyness
04/20
I'm holding a small CAVA position. Diversified my risk, setting a tight stop-loss in case things go south.
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zeren1ty
04/20
Overvaluation is a major red flag. I'd wait for a better entry point before loading up on CAVA.
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Witty-Performance-23
04/20
@zeren1ty What's your target price for CAVA?
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