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Cava Has Multiple Catalysts to Sustain Sales Growth Momentum, UBS Says in Upgrade

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Cava Has Multiple Catalysts to Sustain Sales Growth Momentum, UBS Says in Upgrade

Cava Group (CAVA) is well-positioned for continued same-store sales growth in the long term amid multiple drivers despite a challenging macroeconomic environment, UBS Securities said Wednesday.

Last month, the fast-casual restaurant chain's fiscal first-quarter revenue and same-restaurant sales growth topped Wall Street's views. The company raised the full-year growth forecast for same-restaurant sales to between 4.5% and 6.5% from its previous guidance range of 3% to 5%.

Cava's same-store sales growth could exceed its new guidance amid a "solid traffic-driven sales momentum" so far this year and resilient demand despite the tough macro backdrop, UBS analyst Dennis Geiger said in a note to clients Wednesday.

"Cava remains a compelling growth story, which is increasingly scarce in the sector in the current environment, (with) differentiated menu offerings, multiple sales catalysts, ongoing investments to support sustainability, and healthy new unit returns," Geiger wrote. "In addition to earnings upside potential, we believe sustained outsized growth, without the overhang concerns of select growth peers, should support shares re-rating higher."

UBS upgraded its rating on the company's stock to buy from neutral and raised its price target to $90 from $85.

Cava shares were up 6.7% in Wednesday afternoon trade, bringing its year-to-date gains to nearly 39%.

The company should be able to "comfortably" meet its long-term same-store sales growth target of low- to mid-single-digit percentage over the next few years, and could exceed its 1,000 unit growth target by 2032, according to UBS.

"We remain encouraged by Cava's solid development track record and strong new store performance in recent years," Geiger said. "We expect the brand should maintain a compelling growth trajectory over the coming years."

Price: $82.08, Change: $+5.80, Percent Change: +7.60%

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