Morgan Stanley Downgrades CAVA Group to Equal-Weight, PT $97 from $107.

Morgan Stanley Downgrades CAVA Group to Equal-Weight, PT $97 from $107.

Morgan Stanley has downgraded CAVA Group Inc. (NYSE: CAVA) to an Equal-Weight rating from Overweight, reducing its price target to $97 from $107. The move follows recent earnings reports and guidance updates that have raised concerns among analysts about the company's growth prospects.

CAVA Group reported its second-quarter earnings for 2025, surpassing market expectations. The company achieved earnings per share of $0.16, exceeding the forecast of $0.14, and reported revenue of $278.2 million, which was higher than the projected $249.66 million. Despite these positive results, several analysts have adjusted their price targets for CAVA Group. Baird lowered its price target to $95 from $115, citing disappointing second-quarter comparable sales results. Similarly, Jefferies reduced its target to $100 from $125, noting a miss in same-store sales but acknowledging an EBITDA beat due to improved margins and reduced administrative expenses. KeyBanc also adjusted its target to $85 from $100, pointing to slower sales growth. In contrast, Stifel maintained its $125 price target and reiterated a Buy rating, viewing the recent share pullback as an opportunity despite acknowledging the lower-than-expected same-store sales growth [1].

UBS lowered its price target on CAVA Group to $75.00 from $96.00, maintaining a Neutral rating on the Mediterranean fast-casual restaurant chain. The price target reduction follows CAVA’s second-quarter results, which revealed softer same-store sales momentum. The company faced challenges from lapping steak offerings introduced in 2024 and the impact of newer locations entering their second year in the comparable store base. Despite these challenges, CAVA maintains strong financial health with a current ratio of 3.0x and operates with moderate debt levels. The firm maintained its Neutral stance on CAVA shares, citing the need for further evidence of sustained growth in a challenging macro environment and better visibility into same-store sales trends before taking a more constructive view given current valuation and expectations [1].

Morgan Stanley's downgrade reflects the firm's concern over CAVA's growth prospects and the company's ability to navigate a challenging macro environment. The firm noted that while new store performance remains strong, the negative drag on comparable sales from the "honeymoon effect" in the second quarter could extend into 2026. CAVA updated select guidance metrics for 2025, raising its projected new restaurant openings to 68-70 from the previous 64-68 range. The company simultaneously lowered its same-store sales growth forecast to 4-6% from 6-8%, while maintaining its adjusted EBITDA target of $152-159 million and restaurant margin guidance of 24.8-25.2%. InvestingPro analysis indicates revenue is expected to grow by 23% this year, with 13 additional exclusive ProTips available for subscribers [1].

The mixed analyst sentiment surrounding CAVA Group’s recent performance underscores the need for further clarity on the company's growth trajectory and ability to manage its expanding operations. Investors should closely monitor CAVA's future earnings reports and guidance updates to assess the company's performance and growth prospects.

References:
[1] https://www.investing.com/news/analyst-ratings/cava-group-stock-price-target-cut-by-ubs-on-slowing-sales-growth-93CH-4187627