Cava’s Dip Looks Tasty, Why This Sell-Off Could Be a Gift

Cava Group has done what its customers do best: dip. After hitting an all-time high near $172 last November, the shares have slid to the high-$60s, roughly a 60% slide from the peak, even though the business keeps putting up solid numbers.

That kind of disconnect tends to create opportunity for patient investors who care more about unit economics than headlines.

Key Points

• Revenue rose 20%, same-store sales gained 2.1%, and margins held at 26% despite a 60% stock drop.

• Strong new-store productivity, automation investment, and grocery expansion support long-term growth toward 1,000 units.

• Trades at a premium to peers, but resilient margins make today’s dip a potential entry point.

What Changed Since the Highs?

Cava cut guidance a few weeks back but still posted a good quarter in a tough industry tape thanks to Q2 revenue growth of 20.3% to $278.2 million. Same-restaurant sales were up 2.1%, and the company ended the period with 398 restaurants, up 17% year over year.

Restaurant-level margins held a strong 26.3%, and trailing-12-month AUV ticked up to $2.9 million. Those are not “broken concept” numbers.

If you want a quick yardstick for how rough the category has been, look at the gold standard, which is Chipotle’s Q2 where comparable sales fell 4% even as revenue grew 3% on new unit openings. Clearly, Cava’s +2.1% number actually outperformed many peers.

What’s Being Missed?

Management says the 2025 new restaurant class is tracking above $3 million AUV and opening stronger than last year’s record cohort. New-restaurant productivity is up almost 110%.

Buried in the 10-Q is a $5 million investment in Hyphen Technologies, which makes automated makelines designed to speed digital orders. It’s a convertible note with another $5 million committed upon hitting a milestone. That should scream to investors that Cava is leaning into automation in line speed and consistency.

Cava’s “at-home” business puts Crazy Feta, tzatziki, and dressings in Whole Foods and other grocers. It’s a small piece of revenue today but a big lever for brand reach as Cava enters new markets.

Management called out three-year traffic growth near 20% and noted that Q2 comps re-accelerated exiting the quarter and into Q3 as they lapped last year’s steak launch. They also flagged high brand-health scores with no evidence of “trade-down” behavior in checks. That’s not what you see when a concept is losing relevance.

Valuation Is Not Cheap

After the sell-off, Cava trades around the mid-single-digit to high-single-digit sales multiple in the range of 6–7× recently, still a premium to Chipotle’s ~5×, but with a growth profile and white-space story to match.

And the runway remains compelling with management targeting at least 1,000 restaurants within 7 years, a 150%+ increase from today’s footprint. That goal has been reiterated on recent calls and in earlier investor materials, and the early read on new markets has been positive.

What Will Go Wrong?

Near-term comps are the swing factor. Lapping last year’s steak launch and 2024’s exceptional new-unit “honeymoon” makes the math harder, and consumer confidence is wobbly.

A dip in traffic and the market might well demand a lower multiple. But remember that the Q2 guide-down didn’t come with margin capitulation. Rather, restaurant-level profitability stayed strong, and full-year adjusted EBITDA guidance held, a solid combination.

Could the stock get cheaper?

Certainly, markets overshoot both ways but buying quality at a discount is how long-only investors win, and this looks like one of those moments. Expect management to keep comping, and opening strong stores, and maintain margins near the mid-20s at the restaurant level, so today’s drawdown is likely to look like a generous entry point a few years from now.