Jim Cramer Views CAVA Group (CAVA) as a "Long-term Growth Play"

We recently published a list of Jim Cramer Put These 12 Stocks Under the Spotlight. In this article, we are going to take a look at where CAVA Group, Inc. (NYSE:CAVA) stands against other stocks that Jim Cramer discussed.

On Friday’s episode of Mad Money, Jim Cramer reflected on a significant shift in market sentiment over the past week as he described how the mood turned from cautious to confident.

“We often speak of moments when the stock market tends to do well…. We know that stocks thrive, for instance, when interest rates are going down but there’s another auspicious moment and that’s when the conventional wisdom collectively decides that because of extenuating circumstances, in this case, a welcome break from ever higher tariffs, we’re no longer at risk of a recession in the near future.”

READ ALSO 15 Stocks on Jim Cramer’s Radar and Jim Cramer Recently Commented On These 12 Stocks

Cramer pointed out that this kind of collective pivot in sentiment can be just as impactful as a rate cut. He emphasized that in his long career observing markets, moments like these often mark good entry points for investors. He believes that we are currently in one of those moments.

Looking back on what he called a “very bullish” week, Cramer said it will likely be remembered as the period when Wall Street strategists began to back away from recession warnings. He said that the retreat from doomsday predictions helped fuel a strong rally, especially among industrial stocks.

“If hedge funds thought we were about to experience the apocalypse, and many of them did, then they were poorly positioned coming into this week. And when hedge funds are poorly positioned, you get incredibly motivated buyers like the ones we saw all week that help take us all the way…. And they may not be done with all of their buying, at least because we’re suddenly in a very different world with the pessimists having been caught with their pants down. Until they turn optimistic, which might take a little bit, we should remain in good shape.”

Our Methodology

For this article, we compiled a list of 12 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on May 16. We listed the stocks in ascending order of their hedge fund sentiment as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

CAVA Group, Inc. (NYSE:CAVA)

Number of Hedge Fund Holders: 47

CAVA Group, Inc. (NYSE:CAVA) was mentioned during the episode, and here’s what Cramer had to say:

“Over the past month or so, the vast majority of stocks have rebounded from their lows. Some truly great names are still way off their highs. Take CAVA Group, the Mediterranean restaurant chain that I’ve been recommending for the past 18 months because I think it’s a tremendous regional to national growth story… CAVA will be going up against some tough comparisons in the future, though I remain in the same place on this one.

I view CAVA as a long-term growth play, or what’s known as a compounder on Wall Street, we like those, which grows and grows steadily over a long period of time. Even after the stock’s big pullback from its highs, this isn’t a value play by any stretch of the imagination as CAVA still sells for north of 150 times earnings. Nobody says it’s cheap. These great growers don’t come cheap. I just think it’s a situation where the scale of the opportunity is much, much larger than CAVA’s current $11 billion market capitalization….

Even if the market rolls over and CAVA pulls back again, then I once again view that as an opportunity to build a position, just like when I told you to buy the stock back at 77 in April. Despite the hand ringing about the economy, I’ve not seen anything to make me believe that CAVA can’t still become the great next story. And I’m talking about yes, when we talk about restaurants, maybe the next Chipotle, as long as the regional and national expansion is on track, and it is, this one should have plenty more upside. Great opportunity here.”

CAVA Group, Inc. (NYSE:CAVA) runs a restaurant chain under the CAVA brand and sells dips, spreads, and dressings in grocery stores. The company also offers digital ordering through its website and mobile app. Near the end of April, Cramer commented that the company could have a big run, as he said:

“I like it here. I like it here for the long term. Why? Because I think the Mediterranean is a kind of food that can be like Chipotle, it can be the previous, you know, just the way Chipotle had a big run. I think Cava can too.”

Overall, CAVA ranks 7th on our list of stocks that Jim Cramer discussed. While we acknowledge the potential of CAVA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk.  If you are looking for an AI stock that is more promising than CAVA and that has 100x upside potential, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.