CAVA Stock Trades 53% Below Its 52-Week High: Should You Buy the Dip?

CAVA Group, Inc. CAVA shares have lost 35.2% in the past three months compared with the industry and the S&P 500’s declines of 3.7% and 14.1%, respectively. Consequently, the company’s shares are now trading 53% below the 52-week high of $172.43.

Price Performance

The decline can be primarily attributed to the recent tariff war. Higher input costs, including food, labor and utilities, might hurt the company. The company relies heavily on chicken, a commodity prone to price fluctuations due to weather conditions, feed costs and market demand. Additionally, imported ingredients and supplies, such as bowls, lids and certain food products, are subject to tariffs and supply-chain disruptions, making cost control even more challenging.

The warning signals come as restaurant chains, including peers like Brinker International, Inc. EAT, McDonald's Corporation MCD and Yum! Brands, Inc. YUM faces threats due to slowing discretionary spending. Additionally, competition in the fast-casual space remains intense, with major brands expanding their healthier menu options, potentially eroding CAVA’s competitive edge.

CAVA Trades at a Discount

Despite its recent decline, CAVA is currently priced at a premium relative to its industry, with a forward 12-month price-to-sales (P/S) ratio of 7.31, above the industry average. Conversely, other industry players like Brinker, McDonald's and Yum! Brands are trading at 1.23X, 8.21X and 4.69X, respectively.

CAVA’s P/S Ratio (Forward 12 Months)

CAVA’s Fundamentals Remain Strong

The company has positioned itself as a leader in this emerging cuisine category, leveraging its unique value proposition to resonate with a broad audience. This momentum reflects CAVA's ability to redefine cultural dining trends and establish Mediterranean cuisine as a major player in the restaurant industry.

Investments in technology have played a crucial role in enhancing CAVA’s operational efficiency and customer experience. The company is expanding its AI-powered video technology to more locations in 2025, optimizing kitchen operations and streamlining service. Additionally, a new kitchen display system has been implemented to improve digital order accuracy and efficiency, with plans to roll it out to 250 restaurants.

CAVA has refined its labor and deployment model, ensuring optimized staffing that enhances both team member experience and service quality. These technological advancements position CAVA for sustained growth and improved margins.

CAVA has continued its aggressive expansion efforts, increasing its market penetration and brand recognition. In 2024, the company opened 58 net new restaurants, bringing the total number of locations to 367. A milestone was its entry into Chicago, marking its presence in the Midwest.

In 2025, the company plans to open restaurants in Detroit, Indianapolis and Pittsburgh. With an expected 62-66 restaurant openings this year, it is poised to capitalize on its growing customer base and demonstrate its scalability across diverse markets.

Menu innovation remains a key driver for CAVA’s market differentiation and customer appeal. The introduction of grilled steak in 2024 exceeded expectations, driving increased sales of premium products. Additionally, the launch of garlic ranch pita chips showcased CAVA’s ability to expand into new food categories, appealing to a broader range of consumers. The company plans to continue introducing menu items that cater to evolving consumer tastes, reinforcing its brand relevance and competitive edge in the industry.

CAVA has strengthened its customer retention strategy through its reimagined loyalty program, which has significantly increased engagement. The new earn-and-bank points model has led to an increase in loyalty-driven sales. By leveraging digital platforms and customer insights, the company continues to build brand loyalty and deepen its relationship with its growing customer base.

CAVA’s Estimate Trend

The Zacks Consensus Estimate for earnings per share has seen downward revisions. In the past 7 days, analysts have decreased their estimates for the current year by 1.8% to 55 cents, indicating year-over-year growth of 31%. Then again, Brinker, McDonald's and Yum! Brands’ earnings for the current year are likely to witness year-over-year growth of 103.2%, 4.4% and 9.1%, respectively.

End Note

CAVA’s recent stock plunge reflects mounting external pressures like tariffs, rising input costs and slowing consumer demand in a challenging macro environment. While the fast-casual chain still boasts strong brand positioning, innovative menu offerings and ambitious expansion plans backed by operational tech upgrades, the broader economic headwinds and increasing industry competition are difficult to ignore.

Despite solid fundamentals and long-term potential, near-term volatility and premium valuation suggest that investors should hold existing positions to ride out the turbulence. However, fresh buying should be approached cautiously until market conditions stabilize and earnings revisions turn more favorable. CAVA currently has a Zacks Rank #3 (Hold). 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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