Why Analysts See Double-Digit Upside in CAVA Stock

Key Points

• CAVA is now proving to investors why analysts see a double-digit upside in the company's future, as technical and fundamental factors align for a bull case.
• Institutional buying is taking place in this stock to reiterate the potential path higher.
• Financial growth has proven to be industry-leading to justify a bullish thesis this year.

The most awaited day of April 2025 has shaken markets globally. That day is the so-called “Liberation Day,” when President Trump implemented reciprocal tariffs with the United States and its trading partners effective immediately, lest there be further negotiations between these nations. Price action during these extremely volatile events always creates the greatest opportunities for those who know what they’re looking for.

Today, the price action between certain stocks and the market itself shows investors exactly where they should be looking. Within the retail sector, most stocks are down by double-digit percentage points, leading to a decline in the overall market as it reacts to the latest economic implications and news. However, one stock is holding up stronger than most, leading investors to lean toward a potential buy thesis.

That name is CAVA Group Inc. NYSE: CAVA, a competitor to other fast food chains that focus a bit more on healthy offerings for consumers who are trending in that direction. Competitors such as Chipotle Mexican Grill Inc. NYSE: CMG have already gone to what Wall Street calls “ex-growth,” meaning the sheer size of the company doesn’t allow for further excessive growth rates, and that is where CAVA has an advantage due to size.

New Optimism Born Off CAVA Stock’s Price Action

Over the past month alone, CAVA stock has outperformed the broader S&P 500 index by just over 5.5%, creating a reason for further momentum buyers and value investors to consider this stock amid the breakouts in tariff-driven volatility spikes.

With this in mind, the fundamental view of a company experiencing one of its growth spurts can lead investors to a potentially beneficial addition to their portfolios, and other market participants today share this view.

As of March 2025, analysts at Bank of America decided to initiate coverage on CAVA stock, perhaps a sign that these analysts don’t want to miss out on the opportunity to add to their track record of accuracy and making the “right” call on a stock that is already showing stronger price action to peers and the broader markets.

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The initial rating is a Buy, this time with a valuation of $112 per share on CAVA stock. Compared to today’s prices, which sit at a low of 52% of their 52-week high levels, the upside seems to be justified by the brand's underlying growth rates, implying a rally of up to 24% from where it has fallen to today.

Fundamental Drivers Behind CAVA’s Upside

Apart from its price action relative to peers and the market, there are other non-technical reasons investors can start to become optimistic about the company’s future. One of them is the current Wall Street forecast for earnings per share (EPS) in CAVA.

For the second quarter of 2025, analysts now forecast up to $0.18 in EPS, which would be a significant jump from today’s reported $0.05. Considering that EPS growth rates typically drive stock price performance, investors can take this projection as a clear indication of a double-digit upside path in CAVA.

Speaking of growth, investors can review CAVA’s latest quarterly earnings presentation to get a feel for what has been the norm in this company’s recent past. Revenue reached a high of $225.1 million, a massive 36.8% growth rate compared to the same quarter last year.

This revenue growth is driven by an industry-leading restaurant-level gross profit margin of 22.4%. For those looking ahead, the company’s new 15 store openings act as an additional driver for the future of the company’s bottom-line earnings growth, as openings are a gauge of demand and market penetration from consumer loyalty.

One important metric for investors in growth-spurred companies is free cash flow (operating cash flow minus capital expenditures), which came in at up to $2.1 million for the quarter. This is a significant boost from the previous year’s net outflow, which now makes $52.9 million in free cash flow reported for the fiscal year 2024.

With free cash flow comes the opportunity to compound the company’s value moving forward, which could potentially prove these new analyst ratings correct sooner rather than later. With all of these bullish factors working for CAVA stock, investors shouldn’t be surprised to see new institutional buying taking place.

As of March 2025, those from the California State Teachers Retirement System decided to boost their holdings in CAVA stock by 34.8% to bring their position to a high of $8.4 million today, solidifying the vote of confidence the company deserves.