Shares of Mediterranean fast-casual chain Cava Group (CAVA) have rebounded strongly over the past month, but recent analyst revisions suggest the stock may be nearing fair value, a designation that can often cap future growth potential.
Morgan Stanley is the latest firm to trim its expectations, lowering its price target on CAVA from $115 to $107. The downgrade sparked a sharp reaction, with CAVA shares falling more than 3% following the announcement.
Yet, the market’s response may be overlooking a key point: Morgan Stanley’s new target still implies over 20% upside from current levels, with the stock trading below $90.
If realized, that would bring shares back to their February highs, before tariff concerns and economic slowdown weighed on investor sentiment.
Growth outlook under pressure
Tariffs may have rattled investors, but they aren’t the only concern. Cava disappointed in its fourth-quarter earnings and revised its 2025 outlook downward.
Of particular note: the company expects slower growth in same-store sales, a vital health metric for restaurant chains.
This came even as Cava reported a 10.8% rise in same-store sales during the quarter. However, the company called for moderation ahead, forecasting same-store sales growth of just 6% to 8% for the full year.
Despite the cautious undertones, there were encouraging signs in Q1. Cava beat revenue estimates, posting $332 million in sales versus the $327 million analysts expected.
On a trailing 12-month basis, Cava has surpassed $1 billion in revenue, a key operational milestone for a company that only started trading publicly in 2023.
Inflation pinches restaurant budgets
Cava’s caution reflects a broader trend: Americans are cutting back on dining out, particularly among low- and middle-income consumers. And while Cava isn’t traditional fast food, its customer base does overlap with that of chains like McDonald’s and Burger King.
McDonald’s CEO Chris Kempczinski recently noted that price-sensitive consumers are scaling back, contributing to a 3.6% drop in the company’s U.S. same-store sales.
Cava may be faring better for now. CFO Tricia Tolivar told CNBC that premium purchases — such as pita chips and housemade juices — are helping boost receipts. That suggests the brand’s positioning may be cushioning it from the worst of the downturn.
Analysts warn that even fast-casual and premium chains are not immune.
Sky Canaves, an analyst at eMarketer, said, “Less affluent consumers are most vulnerable to the impact of inflation, and one of the first areas where they’ll cut back is dining out.”
Both Chipotle and Starbucks have recently warned of weakened demand. Chipotle cited a slowdown in consumer spending, while Starbucks has reported five straight quarters of declining comparable sales, with recent results falling short of expectations.
Cava’s recent rally shows investor confidence remains, but the company’s own cautious forecast — along with signs of stress across the restaurant sector — suggests the road ahead could be bumpier.
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