CAVA Stock Down 23% Post Q2 Earnings: Should You Buy, Sell or Hold?

CAVA Group, Inc. CAVA reported second-quarter 2025 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Following the results, the company’s shares declined nearly 23% in the after-hours trading session yesterday. The decline can be primarily attributed to a notable slowdown in comparable sales growth.

In the second quarter, the company reported adjusted earnings per share of 16 cents, beating the Zacks Consensus Estimate of 13 cents. In the prior-year quarter, the company reported earnings per share of 17 cents. The company’s revenues were $280.6 million, missing the consensus estimate of $287 million. The metric increased 20.2% year over year.

CAVA Stock Down 36% in Six Months

Shares of the company have lost 35.5% in the past six months compared with the industry’s decline of 10.3%. In the same time frame, the S&P 500 gained 4.3%. The stock has underperformed other industry players like Brinker International, Inc. EAT, McDonald's Corporation MCD and Yum! Brands, Inc. YUM in the same time frame.

Factors Hurting CAVA

Despite its strong fundamentals, CAVA’s same-restaurant sales growth moderated in second-quarter 2025, rising just 2.1% with traffic essentially flat. The slowdown was most pronounced in June, primarily due to lapping last year’s steak launch, which significantly boosted sales by filling a key menu gap. This anniversary effect created a tough comparison for the quarter. Another factor weighing on comps was the “honeymoon effect” from the 2024 new restaurant class. These units opened at unusually high volumes, making year-two comps appear negative or flat despite their strong absolute performance. This dynamic could continue to mask underlying growth in reported results over the next two years.

CAVA, like its peers, faces macroeconomic pressures that have made consumers more cautious with discretionary spending. While the company has not observed any trade-down behavior or deterioration in value perception, broader industry softness could limit upside in traffic gains. Input cost pressures also remain a consideration, with food, beverage and packaging costs rising slightly year over year due to steak’s higher ingredient costs. In addition, modest tariff impacts are expected in the second half of the year as some products are sourced from affected countries, though management has already factored these into guidance.

Finally, while CAVA has achieved national scale with more than $1 billion in trailing 12-month revenues, it has yet to fully leverage marketing spend as a growth lever. Management is testing media mix models and has identified marketing as a tool it can “lean into” if macro headwinds persist. Until broader campaigns are deployed, however, awareness growth in new and competitive markets may be more dependent on organic word-of-mouth and new store openings than on targeted promotional activity.

What Might Bring the Stock Back on Track?

The company continues to dominate the Mediterranean fast-casual category, which benefits from strong long-term consumer trends favoring flavorful, healthy and authentic food. With no scaled direct competitor, CAVA enjoys a defensible competitive position and growing market share. Its disciplined innovation pipeline remains a growth engine, with upcoming launches such as chicken shawarma, cinnamon sugar pita chips and early-stage salmon testing expected to maintain customer excitement. Past product launches, like steak in 2024, have demonstrated the company’s ability to meaningfully lift traffic and check size.

Operational efficiency is another area of strength. CAVA is rolling out kitchen display systems and TurboChef ovens to improve order accuracy, speed and consistency, while testing AI camera vision technology to reduce waste and ensure freshness. An investment in Hyphen automated make lines aims to enhance digital order throughput without sacrificing the human connection in-store. These initiatives improve scalability and restaurant-level execution, which, combined with a debt-free balance sheet and $385.8 million in cash and investments, give CAVA the financial flexibility to continue expanding aggressively. Customer engagement is also strengthening through creative loyalty campaigns and the upcoming introduction of a tiered rewards program designed to deepen guest relationships and drive repeat visits.

CAVA’s Estimate Trend

The Zacks Consensus Estimate for earnings per share for 2025 and 2026 has remained stable. The company’s earnings in 2025 and 2026 are likely to witness a gain of 38.1% and 17% year over year, respectively.

Then again, Brinker, McDonald's and Yum! Brands’ earnings for the current year are likely to witness year-over-year growth of 115.6%, 5.2% and 9.3%, respectively.

CAVA’s Valuation Looks Expensive

The company is currently valued at a premium compared with its industry on a forward 12-month P/S basis. Its forward 12-month price-to-sales ratio is 7.23, significantly higher than the industry’s 3.77.

P/S (F12M)

Conversely, other industry players like Brinker, McDonald's and Yum! Brands are trading at 1.22X, 7.82X and 4.7X, respectively.

Final Thought on CAVA Stock

CAVA’s latest results highlight a solid long-term growth story, but near-term challenges make the stock less attractive at current levels. The slowdown in comparable sales momentum, caused by tough menu comparisons and the honeymoon effect from prior openings, raises questions about short-term growth visibility. Macroeconomic pressures and modest input cost inflation add another layer of uncertainty, while the company’s premium valuation leaves little room for error. Despite a strong brand position and promising innovation pipeline, the combination of operational headwinds and elevated market expectations suggests that investors may benefit from waiting for a clearer inflection point in sales trends before committing fresh capital. CAVA currently has a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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