Cava Group's Recent Stock Surge: Is Now the Time to Buy?

The recent surge in Cava Group Inc. (NYSE: CAVA) has sparked a heated debate among investors. After reporting a 28.2% year-over-year revenue increase in Q1 2025 and raising its full-year guidance, the stock briefly soared. However, it soon faced a 5.55% post-earnings decline, leaving many to question whether this rally is a sustainable opportunity or a speculative flash in the pan. To evaluate CAVA's investment potential, we must dissect its fundamentals through the lenses of value investing and momentum analysis, weighing its aggressive growth narrative against valuation concerns.

Catalysts for the Surge: Momentum in Motion

CAVA's recent performance has been driven by three key factors: expansion, digital engagement, and operational efficiency. The company opened 15 net new restaurants in Q1 2025, bringing its total to 382 locations—a 18.3% year-over-year increase. This expansion, coupled with a 10.8% rise in same-restaurant sales (driven by 7.5% higher customer traffic), has fueled a 28.2% revenue jump to $328.5 million.

Momentum investors are further buoyed by CAVA's digital transformation. The company's digital revenue mix now accounts for 38% of total sales, a critical metric in the fast-casual sector. Its loyalty program, nearing 8 million members, has also contributed to a 340-basis-point increase in sales attributed to repeat customers. Analysts like Sara Senatore (B of A Securities) and Andrew Charles (TD Cowen) have upgraded price targets, citing CAVA's ability to replicate Chipotle's (CMG) success in the fast-casual space.

Momentum Analysis: Strong, But Not Unquestioned

CAVA's momentum metrics are robust. It holds a Momentum Grade of B from AAII's A+ Investor, with a 61st percentile ranking based on four-quarter relative strength. The stock's weighted relative strength of 1.3% underscores its outperformance against the broader market. However, this momentum is not without caveats.

While CAVA's earnings surprises (e.g., Q1 2025 EPS of $0.22 vs. a forecast of $0.14) have impressed, the market's post-earnings sell-off suggests skepticism. The stock's 5.55% drop after the Q1 report, despite record revenue and profitability, highlights investor caution. Momentum strategies thrive on continuation, but CAVA's elevated valuation—trading at 7.6x 2025 sales and 136x earnings—raises questions about whether the market is pricing in unrealistic growth.

Value Investing Perspective: A Premium for Growth, or a Bubble?

From a value investing standpoint, CAVA is a textbook example of a growth stock priced for perfection. It has a Value Grade of F, with a Price-to-Sales (P/S) ratio of 10.15 and a Price-to-Earnings (P/E) ratio of 84.69. These multiples far exceed industry averages and suggest the market is willing to pay a steep premium for CAVA's expansion plans.

The company's balance sheet, however, offers some comfort. CAVA holds $369.4 million in cash and investments with zero debt, providing financial flexibility for its aggressive 2032 goal of 1,000 locations. Yet, even the most optimistic value investors must grapple with the question: Can CAVA sustain its growth?

Historical comparisons to Chipotle (CMG) are compelling but not guaranteed. Chipotle's same-store sales growth averaged 10% over a decade, while CAVA's Q1 2025 growth of 10.8% is a marginal improvement from Q4's 21.2%. This moderation raises concerns about the sustainability of its 64–68 new restaurant openings in 2025.

Market Reaction and Analysts' Views: Bullish but Cautious

Despite the post-earnings dip, analysts remain largely bullish. The Moderate Buy consensus rating is supported by 18 analysts, with an average price target of $117.82—30% above the current price. KeyBanc's initiation of coverage with a $100 price target further reinforces confidence.

However, not all experts are convinced. Some caution that CAVA's high valuation hinges on its ability to maintain double-digit same-store sales growth and execute its expansion without operational hiccups. Risks include supply chain disruptions, rising labor costs, and the challenge of replicating success in new markets like Detroit and Indiana.

Is Now the Time to Buy? A Balanced View

For momentum investors, CAVA offers a compelling case: strong earnings momentum, a clear growth story, and a leadership position in the expanding Mediterranean food category. Its digital initiatives and loyalty program provide durable competitive advantages.

For value investors, the stock is a harder sell. At current multiples, CAVA trades at a premium to both its fundamentals and peers. A meaningful re-rating would require either a substantial increase in revenue (e.g., exceeding $1 billion in 2025) or a correction in its valuation metrics.

The key question is whether CAVA's growth is structural or cyclical. If the company can sustain its 6–8% same-store sales growth and open 1,000 locations by 2032, the long-term upside could justify the premium. But if growth slows or valuations remain stubbornly high, investors may face a prolonged period of underperformance.

Conclusion: A High-Risk, High-Reward Proposition

CAVA Group is a high-growth stock with a high-risk profile. Its momentum is supported by strong operational execution and a clear expansion roadmap, but its valuation metrics are unsustainable for many value investors.

Investment Advice:
- Momentum investors may consider a position in CAVA, but with a tight stop-loss given the stock's volatility.
- Value investors should wait for a pullback or a meaningful earnings miss that forces a re-rating.
- All investors should monitor Q2 2025 earnings (August 19, 2025) and the company's ability to maintain profitability as it scales.

In the end, CAVA's story is one of ambition and execution. Whether it becomes a Chipotle-like success or a cautionary tale depends on its ability to turn its aggressive plans into sustainable value. For now, the stock remains a high-stakes bet for those willing to tolerate its volatility.