Mediterranean restaurant operator Cava Group (NYSE: CAVA) has been a Reddit hot topic after five strong quarters since its June 2023 IPO. The company operates 341 Cava-branded locations across the United States and is expanding rapidly. In its short history as a public company, the business has been growing and profitable, and the near-term outlook is bright. Shares are up 218.91% since their NYSE debut.
A recent glance at Reddit's investment forums predictably revealed vulgar posts about gambling lifetime savings on options, serious questions about how to fund retirement accounts, and hyperbolic declarations about the best places to put your money to make it grow like the moon. Among them, one mention of Cava Group, the American Mediterranean fast-casual restaurant brand, caught the attention of Reddit users.
Cava is trending thanks to a 218.91% return since its initial public offering (IPO) on the New York Stock Exchange in June 2023. This is backed by its profitable growth since inception, as highlighted below:
With 62 restaurants opened over the past year, increasing the total from 279 in Q2 2023 to 341 in Q2 2024. With revenues expected to increase significantly from US$448.6 million in FY2022 to US$717.1 million in 2023, followed by US$256.3 million in Q1 2024 and US$231.4 million in Q2 2024, Cava Group is on track for a record year. Return to profitability, posting five consecutive profitable quarters since IPO, including US$13.3 million in 2023, US$14.0 million in Q1 2024 and US$19.7 million in Q2 2024, after a loss of US$59 million in 2022. Free cash flow will be positive for the first time in its history, generating US$22.7 million in the second quarter of 2024.
Unlike other popular Reddit stocks like GameStop (NYSE:GME) and AMC Entertainment Holdings (NYSE:AMC), whose stock prices are driven more by sentiment than by unprofitable businesses, Cava Group (NYSE:CAVA) is experiencing strong performance that's garnering attention among fundamentals- and YOLO-focused investors.
The founder-led management team is optimistic that it will continue to gain market share thanks to its scalable restaurant model, which has delivered consistent double-digit same-store sales growth since the IPO.
However, readers interested in Cava Group should proceed with caution in their evaluation and refrain from purchasing shares until they are able to characterize their investment in terms of the unglamorous yet fundamental pillars of financial planning: their goals, risk tolerance, investment time horizon, etc. Important considerations here include the company's impressive but short track record, and the sixth sense that any experienced investor should have that even the most rapid growth trajectory will eventually come downhill.
Learn more about the basics of investing by reading How to Invest: A Comprehensive Guide to Growing Your Money.
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(Photo above: Cava Group)
