Cava (NYSE: CAVA) stock was already up 150% on the year before the restaurant chain crushed its second-quarter earnings report last Thursday.
The company’s success stands in stark contrast to other high-profile companies’ disappointments.
For instance, McDonald’s (NYSE: MCD) stock tanked last month after the company reported its first drop in same-store sales in four years.
Meanwhile, Darden Restaurants (NYSE: DRI) shed 20% of its value in the second quarter of the year. And Red Lobster, which the company sold to a private equity firm in 2014, declared bankruptcy.
It’s amid this backdrop that Cava stock has posted triple-digit growth. Join Wealth Daily today for FREE. We’ll keep you on top of all the hottest investment ideas before they
hit Wall Street. Become a member today, and get our latest free report: “Why You Need to Fire Your Money
Manager.”The Best Free Investment You’ll Ever Make
It contains full details on why money managers are overpaid and provides you with
tools for growing your wealth.On your own terms. No fees, no comission.
Why Cava Stock Is Crushing It
Compared to these other companies, Cava is a newcomer on the fast-casual scene. It was founded in 2006 and went public in 2023.
The chain serves Mediterranean food, offering rice, salad, and grain bowls; chicken, lamb, and falafel wraps; and a smattering of hummus, dips, and sauces.
One opened up in my neighborhood last year, and as someone who enjoys Mediterranean food, I can tell you it was a refreshing addition to an area that’s long been saturated with burger chains like Shake Shack and Five Guys.
It’s affordable, relatively efficient, and healthier than burgers or fried chicken. That’s made it especially enticing to younger customers. Indeed, almost 60% of Cava’s customers are Gen Z or millennials, according to a recent company presentation.
“They don’t want to make compromises or restrictions,” CEO Brett Schulman told Fortune. “They want their flavor, and they want their health too.”
That was certainly evident in Cava’s latest results:
- Revenue rose 35%, to $231.4 million, from $219.5 million a year ago..
- Net income totaled $19.7 million, or $0.17 per share, up from $6.5 million, or $0.21 per share, a year earlier.
- And same-store sales rose 14.4%.
It now expects sales growth of 8.5%–9.5%, up from 4.5%–6.5% in Q1 and its previous guidance of 3%–5%.
Profit margin is expected to be between 24.2% and 24.7%, up from 23.7%–24.3%.
And after adding 18 new restaurants in the last three months, Cava now plans to open 54–57 this year, up from 50–54 in previous guidance.
As it stands now, the company has 341 locations, but it aims to have 1,000 by 2032.
That’s an ambitious plan for growth, and I think it’s likely to succeed. That’s because Cava has found the sweet spot between cheap fast-food chains that overcharge for low-quality food (*cough* McDonald’s *cough*), and traditional sit-down casual restaurants that have fallen out of favor. (Looking at you, Red Lobster.)
“We’re seeing trade down from traditional casual dining, trade up from traditional [quick-service restaurants] and trade over from legacy fast-casual players,” Schulman said.
It’s also exploiting a food niche (Mediterranean) that has been long neglected and under-represented, but is also increasingly popular — especially among younger people.
Given all that, it’s no surprise Cava stock has been a rip-roaring success in an industry where overexposed competitors are suddenly treading water. I think it’s a strong long-term play.
Fight on, Jason Simpkins Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more… In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor’s page. Be sure to visit our Angel Investment Research channel on YouTube and tune into Jason’s podcasts. Want to hear more from Jason? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on. 
