We recently published a list of the 10 Stocks to Buy and Sell Before the Third Quarter 2024 According to Jim Cramer. Since CAVA Group Inc (NYSE:CAVA) ranks 9th on the list, it deserves a deeper look.
Jim Cramer in a latest program discussed the changing consumer trends in the US, wondering whether the consumer is just “fed up” of paying high prices and becoming “frugal.” Cramer said this “frugal thesis” is not “obvious” but he has recognized this latest trend based on some new developments. Cramer named a few consumer companies that are benefitting from the changing consumer behavior because of their discounted price offerings. Cramer rejected the notion that dollar stores are cheap. He said these stores raise prices “aggressively” and calling them dollar stores has become a “misnomer.” The CNBC host said the consumers “want prices lower” and that’s why dollar store companies are getting crushed in the new environment.
Jim Cramer also said the “renting society” is winning the “owning society,” pointing to a new trend where consumers are renting boats instead of buying them to enjoy the experience without spending a fortune.
For this article we watched several latest programs of Jim Cramer aired on CNBC and picked some stocks he’s recommending investors to buy or sell. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
CAVA Group Inc (NYSE:CAVA)
Number of Hedge Fund Investors: 26
Restaurant chain company CAVA Group Inc (NYSE:CAVA) is one of the stocks Jim Cramer is recommending investors to buy on the dip. Here is what Cramer said during a latest program”
” CAVA feels like it has the possibility of being a Chipotle.”
Cramer said he knows the stock had a “big spike” recently, but he’d buy more CAVA Group Inc (NYSE:CAVA) shares if the stock comes down.
Last month, CAVA Group Inc (NYSE:CAVA) reported upbeat Q1 results and hiked full-year guidance. CAVA Group Inc (NYSE:CAVA) now sees 2024 restaurant comparable sales growth of 4.5% to 6.5%, compared with the consensus estimate of +4.5%. Adjusted EBITDA guidance was increased to $100 million to $105 million from a prior outlook for $86.0 million to $92.0 million. CAVA Group Inc (NYSE:CAVA) average unit volume (AUV) has impressed investors while its restaurant-level profit margins, guided to 24% for 2024, are also upbeat given the current market environment.
CAVA Group Inc (NYSE:CAVA) shares have gained about 124% so far this year and the stock’s P/E ratio is now 224, triggering valuation concerns. While CAVA Group Inc (NYSE:CAVA) has reported closed to 30% YoY sales growth over the past couple of quarters, Cava bears say the company might not be able to sustain its comparable sales growth down the road as comp sales growth is easy to achieve during early growth stages. They also say most of CAVA Group Inc (NYSE:CAVA) store footprint spans rich neighborhoods with high population density, and as CAVA expands its store footprint to other areas its profit from growth might moderate. The stock’s forward P/E ratio of 370 is outlandishly higher than industry average of 16.65. Average Wall Street price target on the stock is $87, below its current price of $91.
Overall, CAVA Group Inc (NYSE:CAVA) ranks 9th on Insider Monkey’s list titled 10 Stocks to Buy and Sell Before the Third Quarter 2024 According to Jim Cramer. While we acknowledge the potential of CAVA Group Inc (NYSE:CAVA) , our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CAVA Group Inc (NYSE:CAVA) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.