CAVA Group's Stock Plummets 16% on Weak Sales and Guidance Cut – Is the Fast-Casual Fog Lifting?

Summary
• CAVA Group (CAVA) tumbles 16.07% intraday, trading at $70.925 after opening at $66.81
• 52-week low of $65.70 now within striking distance as turnover surges 38.7%
• Chipotle Mexican Grill (CMG) defies sector weakness with 1.62% gain

CAVA Group’s stock has imploded following a disastrous earnings report that exposed cracks in its fast-casual growth story. The Mediterranean chain’s same-restaurant sales growth of 2.1%—well below the 6.25% estimate—triggered a 16% selloff. With the stock now trading near its 52-week low, investors are scrambling to assess whether this is a buying opportunity or a warning shot in a sector grappling with macroeconomic uncertainty.

Earnings Fog Overshadows Fast-Casual Optimism
CAVA’s collapse stems from a perfect storm of underwhelming results and a revised outlook. Same-restaurant sales growth of 2.1% fell short of estimates, while revenue of $280.6 million missed forecasts despite a 20% year-over-year increase. CEO Brett Schulman attributed the slowdown to macroeconomic 'fog' causing consumer hesitation, compounded by the timing of last year’s steak launch. The company slashed its full-year same-restaurant sales guidance to 4-6% from 6-8%, signaling a structural shift in consumer behavior. With the stock down nearly 40% in 2025, the selloff reflects fears that the fast-casual sector’s growth tailwinds are stalling.

Restaurants Sector Volatile as CAVA Struggles, CMG Holds Steady
While CAVA’s shares cratered, Chipotle Mexican Grill (CMG) bucked the trend with a 1.62% intraday gain, highlighting divergent trajectories within the sector. Chipotle’s strong performance underscores its resilience in a challenging macroeconomic environment, contrasting CAVA’s struggles. The broader restaurant sector remains mixed, with chains like Taco Bell testing value menus and Scream Truck innovating in the ice cream space. However, CAVA’s specific issues—linked to its same-restaurant sales deceleration and guidance cut—suggest its decline is more company-specific than sector-wide.

Options Playbook: Capitalizing on CAVA's Volatility
• MACD: -0.0517 (bearish divergence), RSI: 40.31 (oversold), Bollinger Bands: $91.72 (upper), $87.24 (middle), $82.77 (lower)
• 200-day MA: $104.25 (far above current price), 30-day MA: $87.31 (resistance ahead)

CAVA’s technicals scream short-term bearish momentum, with RSI in oversold territory and MACD signaling bearish divergence. The 52-week low at $65.70 is now a critical support level. For options traders, the CAVA20250822P68 put option (strike $68, expiration 8/22) stands out: it offers a 56.74% leverage ratio, 53.87% implied volatility, and a theta of -0.0136 (moderate time decay). With a turnover of $194,978 and delta of -0.2978, this contract balances liquidity and directional exposure. A 5% downside scenario (targeting $67.38) would yield a payoff of $0.62 per contract, or $620 per 100 shares.

CAVA20250822C70 call option (strike $70, expiration 8/22) also merits attention. Despite a delta of 0.5823 (moderate directional bias), its gamma of 0.0628 and leverage ratio of 23.64% make it responsive to price swings. A 5% drop would nullify its intrinsic value, but its high gamma (0.0628) means it could rebound sharply if the stock stabilizes. With a turnover of $364,147 and implied volatility of 52.95%, this contract offers liquidity and volatility-linked potential.

If $70.925 breaks, CAVA20250822P68 offers bearish potential. Aggressive bulls may consider CAVA20250822C70 into a bounce above $72.55 (intraday high).

Backtest CAVA Group Stock Performance
The CAVA ETF has demonstrated resilience following a significant intraday plunge of -16%. The 3-day win rate is 56.03%, the 10-day win rate is 63.42%, and the 30-day win rate is 65.95%, indicating a higher probability of positive returns in the short term after the plunge. The maximum return during the backtest period was 11.51%, suggesting that while there is potential for gains, the ETF may experience volatility in the aftermath of a sharp decline.

CAVA at Crossroads: Watch 65.7 Support and Sector Sentiment
CAVA’s 16% selloff has exposed vulnerabilities in its fast-casual model, but the stock’s proximity to its 52-week low at $65.70 creates a pivotal inflection point. Technicals suggest a bearish near-term bias, with RSI in oversold territory and MACD signaling divergence. However, the company’s long-term expansion plans—targeting 1,000 locations by 2032—remain intact. Investors should monitor the $65.70 support level and sector dynamics, particularly Chipotle’s 1.62% gain. A breakdown below $65.70 could trigger a wave of panic selling, while a rebound above $72.55 might attract bargain hunters. For now, the path of least resistance is down, but volatility remains a double-edged sword.