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

Core Viewpoint - CAVA Group, Inc. has experienced a significant decline in share price, losing 35.2% over the past three months, which is notably worse than the industry and S&P 500 declines of 3.7% and 14.1%, respectively. The shares are currently trading 53% below their 52-week high of $172.43 [1]. Price Performance - CAVA's shares are trading at a premium relative to its industry, with a forward 12-month price-to-sales (P/S) ratio of 7.31, compared to industry peers like Brinker (1.23X), McDonald's (8.21X), and Yum! Brands (4.69X) [7]. External Challenges - The recent decline in CAVA's stock can be attributed to external factors such as the tariff war, which has led to higher input costs including food, labor, and utilities. The company is particularly vulnerable due to its reliance on chicken, a commodity subject to price fluctuations [5]. - Competition in the fast-casual dining space is intensifying, with major brands expanding healthier menu options, which could erode CAVA's competitive edge [6]. Company Strengths - CAVA has established itself as a leader in the Mediterranean cuisine category, leveraging its unique value proposition to resonate with a broad audience [9]. - The company is investing in technology to enhance operational efficiency and customer experience, including the expansion of AI-powered video technology and a new kitchen display system [10][11]. - CAVA has continued its aggressive expansion, opening 58 net new restaurants in 2024, bringing the total to 367 locations, with plans for further openings in 2025 [12][13]. Menu Innovation - Menu innovation is a key driver for CAVA, with successful product launches such as grilled steak and garlic ranch pita chips, which have driven increased sales and broadened consumer appeal [14]. Customer Engagement - CAVA has revamped its loyalty program, significantly increasing customer engagement and loyalty-driven sales through a new earn-and-bank points model [16]. Earnings Estimates - The Zacks Consensus Estimate for CAVA's earnings per share has seen a downward revision of 1.8% to 55 cents for the current year, indicating a year-over-year growth of 31%. In comparison, peers like Brinker, McDonald's, and Yum! Brands are expected to see higher growth rates [17].