10) Sweetgreen, Inc. (NYSE:SG)
Number of Hedge Fund Holders: 25
One-year Return: ~186%
Average Upside Potential: ~37.2%
Market Cap as of 30th December: $3.70 billion
Sweetgreen, Inc. (NYSE:SG) operates fast-food restaurants in the United States that serve healthy foods on a large scale.
Wall Street believes that Sweetgreen, Inc. (NYSE:SG)’s innovation is its proprietary “Infinite Kitchen” technology. This robotic assembly line system is focused on improving operational efficiency and customer experience. Sweetgreen, Inc. (NYSE:SG) successfully retrofitted its first location in New York City and aims to open more “Infinite Kitchen” locations within the year. “Infinite Kitchen” is an innovative concept that uses robotic automation technology to streamline and optimize food preparation processes.
Analysts opine that this technology should drive significant improvements in restaurant-level margins. Moreover, the “Infinite Kitchen” can potentially lower prices, which can expand the company’s market reach. Apart from reduced labor costs, this technology enables faster service times and increased throughput. Collectively, these can contribute to improved restaurant-level margins.
The technology’s ability to optimize ingredient usage and reduce food waste can result in cost savings and improved sustainability practices. As a result of increased efficiency and potential for lower prices, Sweetgreen, Inc. (NYSE:SG)’s offerings will be accessible to a broader customer base. This will result in an expansion of its total addressable market. As a result, this can accelerate Sweetgreen, Inc. (NYSE:SG)’s unit growth and market penetration, fueling long-term revenue growth and profitability.
Meridian Funds, managed by ArrowMark Partners, sees material upside to the company’s stock on the back of Sweetgreen, Inc. (NYSE:SG)’s investment in automation technology. Here’s what the firm said in its Q1 2024 letter:
“Sweetgreen, Inc. (NYSE:SG) operates restaurants serving fresh and healthy foods in the United States. The salad-focused restaurant concept has invested heavily to develop a captive network of growers that help ensure the freshness of its produce, a distinct competitive advantage. Additionally, management’s investment in automation technology, known as the “Infinite Kitchen,” has shown strong promise of significant labor cost savings, a reduction of order fulfillment errors, and increased restaurant throughput. While Infinite Kitchen has only been tested in a handful of stores to date, initial data supports the potential for automation technology to significantly improve both margins and average unit volumes. The stock rose in the quarter on accelerating same-store sales growth and better than expected guidance from management. In addition, investors took notice that material margin improvements could quickly reduce Sweetgreen’s cash burn, a prior source of concern. Sweetgreen was a new position for the Fund in the quarter.”
