CAVA Group: The Large-Cap Stock Facing Insider Sell-Offs and Short Seller Pressure

CAVA Group, Inc. (NYSE: CAVA), a fast-casual Mediterranean restaurant chain with a $10 billion market cap as of mid-2025, has become a focal point for investors scrutinizing its valuation and governance. Despite its status as a large-cap stock, insiders and short sellers are aggressively unloading shares, raising red flags about the company’s near-term trajectory. Let’s dissect the data to understand why.

Market Cap and Valuation: High Growth, High Skepticism

CAVA’s $10 billion market cap in 2025 reflects investor optimism about its long-term potential. The company aims to grow its store count to 600 locations by 2029 and achieve $2.1 billion in annual revenue, with net income projected between $100–200 million by 2030. However, this optimism is priced into the stock: its 50x P/E ratio—far above the average for restaurant stocks—suggests the market is betting on outsized future growth.

Despite a 41.72% one-year return in 2024, CAVA’s stock had already fallen 23% year-to-date by May 2025, underperforming the S&P 500’s 12.29% gain. This divergence hints at growing skepticism about whether the company can sustain its growth story.

Insider Sell-Offs: Executives Cashing Out

Insider trading data paints a stark picture of leadership’s confidence—or lack thereof. In Q1 2025 alone, insiders unloaded over $1.1 billion in shares, with CEO Brett Schulman leading the charge. Key transactions include:
- January 2, 2025: Schulman sold 1.6 million shares worth $187 million.
- January 21, 2025: CFO Patricia Tolivar sold 2.4 million shares for $293 million.
- February 27, 2025: Schulman converted derivatives into 172,000 shares, further signaling liquidity needs.

While stock awards (grants) were made in February 2025, these were compensation-related and did not involve market sales. The sheer volume of sales by top executives—Schulman alone accounted for $676 million in sales—raises questions about their confidence in the stock’s near-term prospects.

Short Interest: Bears Still on the Sidelines

Short sellers have been less aggressive recently, but their presence remains a concern. As of January 31, 2025, 9.07 million shares were sold short—9.3% of the public float—down slightly from December’s 9.88%. The short interest ratio (days to cover) stood at 3.3 days, indicating moderate bearishness.

While the January decline in short interest signals some bullish sentiment, the lack of data beyond January 2025 leaves uncertainty. Institutional short sellers like Wolverine Trading and Millennium Management remain active, suggesting lingering doubts about CAVA’s ability to meet its 2025 sales guidance of 6–8% same-store sales growth (a steep drop from 2024’s 13.4%).

Company Challenges: Growth Hurdles and Margin Pressures

CAVA’s current struggles highlight why insiders and short sellers are wary:
1. Slowing Sales Growth: The 6–8% 2025 sales guidance is half its 2024 pace, with rising input costs (tariffs, wages) squeezing margins.
2. Valuation vs. Reality: A 50x P/E ratio requires flawless execution of its expansion plans—unlikely in an inflationary environment.
3. Debt and Capital Allocation: Aggressive store openings require capital, potentially diverting funds from margin improvements.

Conclusion: A Stock Divided Between Hope and Reality

CAVA’s $10 billion market cap underscores its potential, but the disconnect between its high valuation and near-term risks makes it a volatile play. The $1.1 billion in Q1 insider sales—led by its CEO and CFO—signal a lack of confidence in the company’s ability to navigate margin pressures and slowing sales. Meanwhile, short sellers, though less aggressive in early 2025, remain positioned to capitalize on any stumble.

Investors should weigh two scenarios:
- Bull Case: CAVA executes flawlessly, grows to 600+ stores, and justifies its 50x P/E.
- Bear Case: Missed sales targets, margin erosion, or rising debt lead to a valuation reset.

Final Take: While CAVA’s long-term vision is ambitious, the near-term risks—exacerbated by insider selling and margin headwinds—make it a high-risk, high-reward bet. For cautious investors, patience may be the best strategy until fundamentals align with its sky-high valuation.

Data as of May 2025. Past performance does not guarantee future results.