CAVA Group Shares Plunge 29% Year-to-Date Despite Earnings Beat

CAVA Group(CAVA) shares rose 0.89% today, marking the lowest share price since April 2025, with an intraday decline of 1.01%.

The strategy of buying CAVA shares after they reached a recent low and holding for 1 week yielded moderate returns over the past 5 years, with a 7.56% annualized return and a 37.41% overall return as of May 31, 2025. However, this was slightly underperforming the S&P 500, which had an annualized return of 9.48% and a total return of 42.69% over the same period. The Sharpe ratio for the strategy was 0.77, indicating a reasonable risk-adjustured return.

CAVA Group has shown strong earnings performance, consistently surpassing consensus EPS and revenue estimates over the past four quarters. The company reported earnings of $0.22 per share, beating the Zacks Consensus Estimate of $0.14 per share, reflecting a positive earnings surprise of 57.14%.

Despite beating revenue expectations in Q1 and demonstrating strong growth and top-tier margins, there are concerns about CAVA's lofty valuation and a conservative full-year revenue outlook. This has led to investor disappointment and has contributed to a stock decline of about 29% year-to-date.

UBS has recently cut CAVA's target price from $125 to $112, indicating a more cautious outlook on the stock. This adjustment reflects the market's growing concerns over CAVA's valuation and future growth prospects, despite its strong earnings performance.