Cava Group (CAVA): Why Jim Cramer’s Bullish Call Still Holds Water Amid AI Hype

Isaac LaneFriday, May 16, 2025 7:22 pm ET
33min read

In a market obsessed with AI’s siren song of exponential returns, one contrarian play is quietly outperforming:

Cava Group
(CAVA). Despite the frenzy over generative AI stocks, CAVA’s 25.58% surge since Jim Cramer’s endorsement on May 2, 2024, underscores its resilience in a volatile landscape. This Mediterranean fast-casual chain isn’t just a flash-in-the-pan—it’s a sustainable growth story anchored in health-conscious demand, robust fundamentals, and a valuation that even AI skeptics can’t ignore.

The Contrarian Case for CAVA: Performance and Trends

Cramer’s bullish call was no accident. Since his endorsement, CAVA has capitalized on two unstoppable forces: health trends and operational excellence.

  1. Health-Conscious Demand:
    CAVA’s focus on fresh, Mediterranean-inspired meals taps into a secular shift toward healthier eating. This isn’t a fad—sales data shows it:
  2. Q3 2024 Same-Store Sales: Surged 18%, outpacing estimates.
  3. Q1 2025 Results: Same-store sales grew 10.8%, driven by 7.5% traffic increases and menu price optimization.

While AI stocks soar and crash on speculative news, CAVA’s growth is tied to a recurring, real-world need: people wanting to eat better.

  1. Fundamentals That Outpace the Hype:
  2. Margin Expansion: Restaurant-level margins hit 25.6% in late 2024 and stayed near 25.1% in Q1 2025 despite rising input costs.
  3. Aggressive Expansion: With 382 locations today and a goal of 1,000 by 2032, CAVA is scaling without overextending.
  4. Hedge Fund Backing: 47 institutional holders, including prominent funds, have accumulated stakes—a silent vote of confidence.

Valuation: A Discounted Chipotle, Not a Risky Bet

CAVA’s valuation is deceptively cheap for a high-growth company. At a $10.98B market cap, its price-to-book (P/B) ratio of 15.72 is half its 2024 peak and far below AI stocks trading at 50x+ P/S ratios.

Critics may cite its elevated P/B compared to peers, but this ignores two realities:
- Asset-light model: CAVA’s franchise-heavy strategy (80% of new locations are franchised) requires less upfront capital.
- Underestimated scalability: At its current pace, CAVA could hit $1.6B in annual revenue by 2026—a 29.74% EPS growth trajectory supported by analyst upgrades.

Why AI Hype Can’t Distract from CAVA’s Safety

While AI stocks like CRWD or NVDA flirt with 30%+ volatility weekly, CAVA’s risk profile is decoupled from tech cycles:
- Stable Cash Flow: Recurring customer spending and a 15% annual store growth target provide predictability.
- Low Debt: Net debt/EBITDA is 0.5x, a fraction of leveraged tech peers.

The Call to Action: Why Now?

With shares at $97.05, CAVA is primed for a May breakout. Analysts see a $105.32 monthly average, with a high of $113.27 by month-end—a 17% upside. The May 21 peak of $100.64 is a clear catalyst, but the bigger picture is this:

  • Buy the dip: Short-term volatility (e.g., the 200-day SMA at $113.42) creates entry points.
  • Fundamental momentum: Q1’s 83% EPS jump (to $0.22) and revised 2025 guidance for $159M EBITDA confirm the thesis.

Final Take: A Safer, Scalable Bet

In a market fixated on AI’s “moonshots,” CAVA offers a rare blend of safety and growth. Its 25.58% return since Cramer’s call isn’t luck—it’s the result of a repeatable model in a secular trend. With a P/B half its peak and EPS growth poised to accelerate, this is a stock to own—not trade.

The question isn’t whether AI will dominate the future. It’s whether you want to bet on it at 50x multiples or on a proven, cash-generative business at 15.72x. For contrarians, the choice is clear.

Act now—before the next Cramer plug turns CAVA into a crowded trade.