CAVA Stock Looking for Direction After Earnings Miss

Key Points

• CAVA Group missed Q3 profit estimates but posted strong year-over-year growth in sales and earnings.
• The fast-casual sector shows consumer weakness, but CAVA’s margins and expansion plans remain intact.
• With shares down 58% in 2025 and an oversold RSI, CAVA stock may present a value opportunity for patient investors.

CAVA Group Inc. NYSE: CAVA stock is down a fraction in midday trading the day after the company delivered a disappointing, but not surprising, third-quarter earnings report.

For the quarter ended Oct. 5, the company generated adjusted earnings per share (EPS) of 12 cents on revenue of $289.79 million. The company missed estimates by 13 cents per share on revenue of $291.95 million.

However, what may be boosting investor sentiment is that both the top and bottom-line numbers compared favorably to the company’s results from the same quarter in 2024. On a year-over-year (YOY) basis, CAVA’s revenue was 19% higher, and EPS was 18% higher.

The Fast Casual Fade Continues

CAVA stock investors were hoping that the restaurant chain would be the anti-Chipotle in this earnings cycle. That is, show that the weakness in the Chipotle Mexican Grill NYSE: CMG numbers was confined to Chipotle.

That wasn’t the case as CAVA's results show a broader weakness among restaurant stocks. The chain’s core consumer remains under stress that is eating away at disposable income. Even McDonald’s Corp. NYSE: MCD acknowledges that it is dealing with a bifurcated consumer economy.

One could argue that this is a transitory phenomenon, and that may be true. For its part, CAVA lowered its guidance slightly but still plans to open new stores. It also still delivered a healthy 24.6% restaurant-level profit margin in the quarter.

However, investors are in a "sell-first and ask questions later" kind of mood. So, while the results from CAVA Group were far from awful, they were bad enough to send the stock lower.

Understanding CAVA’s Valuation

The investor reaction to CAVA’s results comes down to one word that is affecting many stocks: valuation.

CAVA stock trades at 43x earnings and 103x forward earnings. That may not be a fair measure of the stock’s value because the company is still expanding its brick-and-mortar footprint.

A more accurate measure may be the company’s enterprise value-to-sales (EV/Sales) ratio. This is a standard metric that compares a company’s enterprise value (i.e., its potential takeover price) to its annual sales. Currently, CAVA checks in with an EV/sales ratio of 5.24, which is a discount to its historical average.

Investors may say that doesn’t say much for a company that’s only been trading publicly for a little over two years.

However, when compared to a company like Dutch Bros Coffee NYSE: BROS, which has only been publicly traded for about four years, the results are favorable. BROS stock has an EV/sales ratio of 6.49%.

After a Big Drop, CAVA Stock May Offer Solid Value

One reason CAVA stock may have found a floor is that it has already declined by approximately 58% in 2025 and is down 5% over the last week. Most of that loss occurred before the earnings announcement. So, this may be a case of investors expecting the results to be worse than they were.

The CAVA Group analysts tracked by MarketBeat have given the stock a consensus price target of $84.45, representing a 61% increase from its current price.

However, they have been lowering their price targets in the days leading up to the earnings announcement.

But it's worth noting that the lowest price target at that time was $61, which is still a 13% gain from the current price.

Short interest is around 13% and has increased by about 2% in the last month. That lines up with institutional activity.

In the last quarter, selling slightly outpaced buying, suggesting institutions are attempting to move the CAVA stock price to a more favorable entry point.

They may have succeeded. The relative strength index is around 29, which puts the stock in oversold territory. It’s also trading near the lower Bollinger band, which leaves room for the stock to move higher.