Gary Black
Co-Founder & Portfolio Manager of The Future Fund
CAVA's results defy restaurant downturn fears: Q1 same-store sales rose 9.7% versus 6.0% expected, helped by its new pomegranate salmon dish, and every Q1 metric beat. The CFO says Q2 comps are tracking in line with Q1, far above the Street's 4.7%, while full-year comp guidance rose to 4.5-6.5% and adjusted EBITDA guidance to $181-191M. Short interest of 13% should add to strength on the beat. x.com x.comÂ
CAVA looks attractive near $50, close to its 52-week low, with sales projected to grow more than 20% a year for the next three years. It is still an expensive stock at a P/E above 90. x.comÂ
Cava's restaurants, nearly the only fast-food chain in the Mediterranean space, are about to pass Chipotle in sales per unit. Two officers have bought shares, a positive write-up lifted the stock 3.4%, and the chart shows a bullish falling wedge. x.comÂ
CAVA's growth trajectory just doesn't support its current share price, making it a short idea. x.comÂ
Casey's General Stores is getting interesting after a 15% drop, with store growth and owned real estate supporting value, though 25x earnings would be the preferred entry. It targets 120 new stores in FY27, and remodeled CEFCO sites see about 30% prepared food and dispensed beverage lifts. It owns 2,703 of its 2,944 stores, worth roughly $6.8B at $2.5M each, about 25-35% of its equity value, offering sale-leaseback optionality. x.com x.com x.comÂ
Cava Group's valuation is hard to justify for a restaurant chain at 74x 2028 earnings, a multiple even Chipotle never reached during its hypergrowth phase. That holds even though, as @Brian_Stoffel_ notes, Cava's same-store sales rose about 10%, well ahead of its closest competition, with traffic up about 7%. x.comÂ
Cava looks like a decent short because rising input costs are about to hit just as consumers get squeezed. Higher energy, urea and fertilizer prices will almost certainly raise food costs, while the stock trades at 114x forward earnings for about 25% expected EPS growth over five years. Much of the recent rally looks like a short squeeze that is likely nearly or already done. x.com x.comÂ
CAVA's 30% jump in three days on no news looks like a bizarre late-cycle move against weak fundamentals. Screwworm, a declining savings rate and a ridiculous valuation all argue against it. Target and private-credit-exposed names like Ares have shown similarly relentless moves late in the week. x.comÂ
Cava Group trades at the EV/sales multiple where Chipotle peaked, despite vastly inferior unit economics. The persistent bid under the stock is ridiculous. A post the author replies to notes Chipotle's permabid lasted six years, about as far as the fast-casual concept can run before gravity resumes. x.com x.comÂ
Cava's share price looks out of line with the restaurant sector. Restaurants are carnage right now, with Chipotle back at $32, so there is little reason for Cava to hold up here. x.comÂ
CarGurus, CAVA and Expedia can be faded after double-digit gains this week that nothing in their earnings outlook justified. The rally came despite rising commodity prices and the war, and likely reflects heavy short positions being covered as funds de-grossed, plus options expiration. All three are negatives in an AI world, with CAVA exposed through weaker white-collar and college job prospects. x.comÂ
