Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of coffee worldwide. The company operates through three segments: North America, International, and Channel Development. Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single serve products, and ready-to-drink beverages; and various food products, such as pastries, breakfast sandwiches, and lunch items. The company also licenses its trademarks through licensed stores, and grocery and foodservice accounts. The company offers its products under the Starbucks Coffee, Teavana, Seattle's Best Coffee, Ethos, Starbucks Reserve, and Princi brands. Starbucks Corporation was founded in 1971 and is based in Seattle, Washington.

Starbucks Corporation

Key Points
Dutch Bros reported having 1,043 shops in the second quarter and plans to grow to 2,029 shops by 2029.
Adding 14% more shops played a huge role in the company's revenue growth over the last year.
In the coffee market, one of the biggest surprises in recent years is Dutch Bros (NYSE: BROS). Earlier this year, its stock reached an all-time high. Even though it has almost pulled back into bear market territory since then, it appears to have become the most popular coffee stock since Starbucks (NASDAQ: SBUX).
Given its current state, Dutch Bros could easily outperform the well-established coffee giant over the next few years, and one reason shows why.
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Why shareholders should focus on Dutch Bros
Investors should focus on Dutch Bros due to its regional-to-national expansion. Historically, regional-to-national expansions have driven outsized gains for stores like Home Depot and Walmart, but the most relevant example for Dutch Bros is its largest competitor, Starbucks.
When Starbucks began trading in 1992, it only had 165 locations. In subsequent years, the national and then global expansion grew to its current footprint of over 41,000 stores. That growth path has earned Starbucks returns of nearly 26,000% over its 33-year history, but has also exhausted nearly all remaining domestic-growth prospects.
Now, it's Dutch Bros' turn. As of the end of the second quarter of 2025, the company has grown to 1,043 shops in 19 states, 14% more shops than 12 months prior.
That increase means that revenue, which came in at $771 million for the first half of the year, rose 29%, compared to the same period last year. Also, same-store sales, which only apply to stores opened for more than 15 months, increased by 5% in the year's first half.
Investors should expect the growth to continue. The company has outlined a goal of having 2,029 shops by 2029, a target that would nearly double its footprint in four years.
Looking at the stock, it has increased by just over 130% over the last year. Although Dutch Bros can't guarantee a repeat of that performance, the regional-to-national expansion makes continued stock-price growth highly likely.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Looking to Beat the Stock Market? 1 Reason to Set Your Sights on Dutch Bros Stock.

(RTTNews) - Starbucks is betting that a more inviting, inclusive café experience can help revive its struggling U.S. business.
The coffee giant announced plans to "uplift" 1,000 stores by the end of 2026, prioritizing cozier interiors and accessibility improvements over major new builds or large-scale renovations. Each update will cost about $150,000, with stores staying open during the work.
The redesigns are aimed at restoring Starbucks' reputation as a "third place" a communal spot between home and work a role the brand has lost in recent years as it removed seats, cut electrical outlets, and leaned heavily into mobile ordering.
Under CEO Brian Niccol, who took the helm earlier this year, the company is reversing many of those choices, including a pledge to bring back 30,000 seats across its U.S. stores.
New design features vary by location but share a common goal: creating warmer, more inclusive spaces. Updates include softer lighting for customers with light sensitivity, movable tables accessible to wheelchair users, additional seating, rugs to dampen noise, and the return of outlets to support students and remote workers. Leather seating, live plants, and decorative elements reflecting local communities are also part of the refreshed aesthetic.
"We're uplifting more than 1,000 coffeehouses, blending our global heritage with local relevance to create spaces that are immersive, inclusive, and deeply human," said Dawn Clark, senior vice president of coffeehouse design and concepts.
The first phase has begun in New York and Southern California, with more locations to follow nationwide. By reshaping its stores into more comfortable gathering spaces, Starbucks hopes to not only attract a broader customer base but also reignite the sense of community that once defined its brand.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Starbucks Revamps Cafes With Inclusive Designs To Win Back Customers

McDonald’s Corporation MCD is leaning into a multi-year, technology-led transformation that could reshape its cost structure and improve customer engagement. The company’s “Accelerating the Arches” strategy is now being underpinned by three digital platforms — restaurant, consumer and company — designed to scale innovation, boost efficiency and enhance loyalty economics.
At the center of this push is the deployment of edge computing across U.S. restaurants, which enables AI- and IoT-driven capabilities such as predictive equipment maintenance, automated order taking and real-time operations management. Early results are promising, with “ready on arrival” geofencing cutting wait times by more than 50% in pilot markets. These innovations improve speed of service, enhance crew productivity and reinforce customer satisfaction.
On the consumer side, McDonald’s loyalty program has surpassed 185 million active users globally in the second quarter of 2025. U.S. members who joined the program more than doubled their annual visits (from 10.5 to 26), highlighting the frequency upside as adoption scales. Management is targeting 250 million active loyalty users by 2027, positioning the brand to capture more consistent repeat spend while deepening digital engagement.
By integrating technology across restaurants, consumers and corporate functions, McDonald’s is establishing a scalable operating framework that supports both revenue growth and margin resilience. With the bulk of investment weighted toward 2025-2026, the company is positioning itself for operating leverage as digital platforms mature and efficiencies flow through the P&L.
In an environment where consumer value perceptions and traffic trends remain under strain, the ability to drive structural cost savings and throughput gains via technology could emerge as McDonald’s competitive differentiator over the next cycle.
How It Stacks Up to Competitors
Starbucks Corporation SBUX continues to leverage its digital ecosystem as a core growth driver, with the Starbucks Rewards program reaching approximately 34 million 90-day active members in the U.S. Loyalty penetration remains a key contributor to both transaction growth and average ticket expansion. The rollout of SmartQ technology, designed to alleviate peak-hour bottlenecks, along with new in-store equipment upgrades, is improving order throughput and reinforcing Starbucks’ premium brand positioning. For fiscal 2025, management is guiding to low-single-digit comparable sales growth, with digital engagement expected to remain a central lever for mix optimization and margin resilience.
Chipotle Mexican Grill, Inc. CMG is intensifying its digital strategy, with online and app-based transactions accounting for 35.5% of sales in second-quarter 2025. Its loyalty program, now with roughly 20 million members, remains a core engagement tool, helping to drive higher order frequency and digital mix. To support this growth, Chipotle has expanded its second digital makeline across more restaurants, enhancing order accuracy and throughput during peak periods. Management also emphasized ongoing investments in back-of-house efficiency and equipment upgrades aimed at improving productivity. While restaurant-level margin slipped to 27.4% in the quarter, down about 150 basis points year over year, management views these digital initiatives as key levers to restore Chipotle’s operating leverage and sustain long-term margin expansion.
The Zacks Rundown for MCD Stock
McDonald’s shares have gained 2.4% in the past three months against the industry’s decline of 3.2%.
MCD Three-Month Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, MCD trades at a forward price-to-sales ratio of 8.14, significantly higher than the industry’s 3.79.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for McDonald’s 2025 and 2026 earnings per share implies a year-over-year uptick of 5.5% and 8.2%, respectively. The estimate for 2025 has been northbound in the past 60 days.
Image Source: Zacks Investment Research
McDonald’s stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Can McDonald's Tech Platform Unlock a New Wave of Margin Expansion?

Investors in Starbucks Corp. (Symbol: SBUX) saw new options become available today, for the October 24th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the SBUX options chain for the new October 24th contracts and identified one put and one call contract of particular interest.
The put contract at the $78.00 strike price has a current bid of 72 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $78.00, but will also collect the premium, putting the cost basis of the shares at $77.28 (before broker commissions). To an investor already interested in purchasing shares of SBUX, that could represent an attractive alternative to paying $87.16/share today.
Because the $78.00 strike represents an approximate 11% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 80%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 0.92% return on the cash commitment, or 6.74% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for Starbucks Corp., and highlighting in green where the $78.00 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $95.00 strike price has a current bid of $1.02. If an investor was to purchase shares of SBUX stock at the current price level of $87.16/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $95.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 10.17% if the stock gets called away at the October 24th expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if SBUX shares really soar, which is why looking at the trailing twelve month trading history for Starbucks Corp., as well as studying the business fundamentals becomes important. Below is a chart showing SBUX's trailing twelve month trading history, with the $95.00 strike highlighted in red:
Considering the fact that the $95.00 strike represents an approximate 9% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 71%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 1.17% boost of extra return to the investor, or 8.54% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 42%, while the implied volatility in the call contract example is 34%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 250 trading day closing values as well as today's price of $87.16) to be 33%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

October 24th Options Now Available For Starbucks (SBUX)

Looking at options trading activity among components of the Russell 3000 index, there is noteworthy activity today in American Eagle Outfitters, Inc. (Symbol: AEO), where a total volume of 70,749 contracts has been traded thus far today, a contract volume which is representative of approximately 7.1 million underlying shares (given that every 1 contract represents 100 underlying shares). That number works out to 54.8% of AEO's average daily trading volume over the past month, of 12.9 million shares. Particularly high volume was seen for the $19 strike call option expiring February 20, 2026, with 6,913 contracts trading so far today, representing approximately 691,300 underlying shares of AEO. Below is a chart showing AEO's trailing twelve month trading history, with the $19 strike highlighted in orange:
JPMorgan Chase & Co (Symbol: JPM) options are showing a volume of 37,128 contracts thus far today. That number of contracts represents approximately 3.7 million underlying shares, working out to a sizeable 54% of JPM's average daily trading volume over the past month, of 6.9 million shares. Particularly high volume was seen for the $290 strike call option expiring November 21, 2025, with 2,414 contracts trading so far today, representing approximately 241,400 underlying shares of JPM. Below is a chart showing JPM's trailing twelve month trading history, with the $290 strike highlighted in orange:
And Starbucks Corp. (Symbol: SBUX) options are showing a volume of 42,557 contracts thus far today. That number of contracts represents approximately 4.3 million underlying shares, working out to a sizeable 52.4% of SBUX's average daily trading volume over the past month, of 8.1 million shares. Especially high volume was seen for the $87 strike call option expiring September 05, 2025, with 3,354 contracts trading so far today, representing approximately 335,400 underlying shares of SBUX. Below is a chart showing SBUX's trailing twelve month trading history, with the $87 strike highlighted in orange:
For the various different available expirations for AEO options, JPM options, or SBUX options, visit StockOptionsChannel.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Noteworthy Wednesday Option Activity: AEO, JPM, SBUX

In early trading on Wednesday, shares of Alphabet topped the list of the day's best performing components of the Nasdaq 100 index, trading up 7.8%. Year to date, Alphabet registers a 20.0% gain.
And the worst performing Nasdaq 100 component thus far on the day is Zscaler, trading down 3.2%. Zscaler is showing a gain of 47.3% looking at the year to date performance.
One other component making moves today is Starbucks trading down 2.1% on the day.
VIDEO: Nasdaq 100 Movers: ZS, GOOG
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Nasdaq 100 Movers: ZS, GOOG

(RTTNews) - Starbucks is taking aim at the booming demand for protein-rich foods with the launch of Protein Cold Foam and Protein Lattes, set to roll out across U.S. and Canadian stores on September 29.
The move taps into shifting consumer habits, as more Americans prioritize protein for muscle health, satiety, and wellness, a trend fueled by fitness culture and the rise of weight-loss drugs like Ozempic.
The new offerings significantly boost the protein content of Starbucks drinks. Adding Protein Cold Foam to a grande beverage will provide 19 to 26 grams of protein, while the grande Protein Latte delivers between 27 and 36 grams.
The cold foam, already one of Starbucks' most popular customizations since its 2018 debut, will now be available in a range of flavors including banana, vanilla, chocolate, matcha, salted caramel, and seasonal pumpkin.
Crafted with protein-boosted milk a fresh daily blend of 2% milk and unflavored protein powder the lattes are designed to give customers an extra protein option without added sugar or compromising flavor. Customers will also soon be able to customize other drinks with the protein-boosted milk, adding 12 to 16 grams of protein per grande.
The launch comes as Starbucks recently reported its best-ever U.S. sales week, fueled by the return of pumpkin spice lattes, signaling early success in its turnaround strategy under CEO Brian Niccol. Global Chief Brand Officer Tressie Lieberman said the protein line reflects Starbucks' push to modernize its menu with "innovative, relevant, and hype-worthy products."
By leaning into the protein craze, Starbucks is betting it can expand its dominance in cold beverages while appealing to health-conscious consumers a fast-growing segment of its customer base.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Starbucks Bets On Protein Trend With New Cold Foam And Lattes

Dutch Bros Inc. (BROS) shares have surged 22.8% in the past month against the industry’s decline of 0.1%. In the same time frame, the S&P 500 has gained 2.3%. Dutch Bros is thriving, thanks to strong transaction growth, high-performing new shops, a deep operator pipeline, innovation-led engagement and disciplined financial management.
Price Performance
Image Source: Zacks Investment Research
Closing at $71.83 in the last trading session, below its 52-week high of $86.88 but above its 52-week low of $30.45. In the past month, shares of other industry players like Starbucks Corporation (SBUX), Yum China Holdings, Inc. (YUMC) and Texas Roadhouse, Inc. (TXRH) have declined 1.8%, 3.8% and 6.6%, respectively.
Factors Aiding BROS
Dutch Bros continues to see healthy customer traffic, with system same-shop sales up 6.1% and transaction growth of 3.7% in the second quarter of 2025. This marks another consecutive quarter of traffic gains, which is especially notable in today’s restaurant landscape, where many peers struggle with guest counts. The momentum stems from a multi-pronged strategy, innovation, targeted marketing, and loyalty engagement that has created consistent demand.
The company is also benefiting from expansion efforts. BROS opened 31 new shops in the second quarter of 2025, including entry into Indiana, its 19th state. Importantly, new shops are performing strongly right out of the gate, with system-wide AUVs at $2.05 million, near record levels. Dutch Bros expects to open at least 160 shops in 2025, supported by a disciplined market planning process, strong real estate capabilities, and an operator pipeline of more than 450 candidates. Elevated shop productivity demonstrates that the brand resonates even in new markets far from its West Coast roots.
Management reiterated its ambition to grow from just over 1,000 shops today to more than 2,000 by 2029, with a long-term potential of 7,000 shops nationwide. The brand’s strong customer love, consistent lines at openings, and early traction in new geographies highlight the significant white space opportunity ahead.
Dutch Bros is relying on a three-pronged strategy to drive transactions and maintain customer traffic growth. The company continues to spark excitement through menu innovation, rolling out seasonal beverages and limited-time offers, such as Lavender and Dulce de Leche, along with creative engagement initiatives like friendship bracelets and the Dutch Cozy. At the same time, stepped-up paid advertising is lifting both aided and unaided brand awareness, particularly in newer markets where the company is focused on closing the awareness gap. Complementing these efforts, the Dutch Rewards program now accounts for 72% of transactions, up five points year over year, giving the brand powerful tools to personalize offers, segment customers more effectively, and build stronger long-term relationships.
Digital ordering is gaining traction, with order-ahead accounting for 11.5% of sales at the end of second-quarter 2025, and doubling that in some newer markets. Walk-up windows now contribute around 15% of transactions, easing drive-thru bottlenecks. Enhanced dashboards and labor deployment models are boosting throughput, while food pilots show encouraging results in driving incremental morning traffic and ticket lift.
Dutch Bros’ Estimate Revisions
In the past 30 days, the Zacks Consensus Estimate for 2025 and 2026 has been revised upward by 11.9% to 66 cents and 4.9% to 85 cents, respectively. These estimates indicate year-over-year growth rates of 34.7% and 28.4%, respectively.
Image Source: Zacks Investment Research
Meanwhile, Starbucks, Yum China and Texas Roadhouse earnings in the current year are likely to witness a decline of 33.2%, growth of 7.3% and 2.6%, respectively.
BROS Trades at Premium Valuation
Dutch Bros is trading at a premium to the industry, with a forward 12-month price-to-sales of 6.38X, which is well above the industry average of 3.78X. Meanwhile, Starbucks, Yum China and Texas Roadhouse are trading at P/S ratios of 2.56X, 3.78X and 1.82X, respectively.
P/S(F12M)
Image Source: Zacks Investment Research
End Notes
Despite its premium valuation and sharp stock gains, Dutch Bros offers a compelling long-term growth story that can justify investor interest. The company is delivering consistent traffic growth in a challenging industry backdrop, supported by strong new unit performance, a robust pipeline of operators, and a culture that fuels brand loyalty. Its three-pronged transaction strategy — built on menu innovation, targeted advertising, and an expanding loyalty program — has proven effective in sustaining customer engagement while digital initiatives and food pilots add fresh layers of growth. With a clear roadmap for aggressive national expansion and rising analyst confidence in its earnings outlook, Dutch Bros stands out as a high-quality growth name where stretched valuation reflects genuine momentum and substantial future potential.
BROS currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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BROS Up 23% in a Month, Valuation Stretched: How to Play the Stock?

Dutch Bros Inc. (BROS) is pressing the accelerator on expansion, but the key question remains whether transaction growth can keep pace with its ambitious store rollout.
In the second quarter of 2025, revenues surged 28% year over year to $416 million, supported by 6.1% system same-shop sales growth and 3.7% transaction growth. Company-operated shops posted even stronger comps at 7.8%, fueled by nearly 6% transaction gains. These results highlight solid customer demand at a time when consumer traffic has been pressured across much of the restaurant industry.
Expansion remains the centerpiece of Dutch Bros’ strategy. The chain opened 31 shops in second-quarter 2025, entering Indiana as its 19th state and is on track to open at least 160 system shops in 2025. New store productivity is holding at elevated levels, with average unit volumes of $2.05 million, reinforcing management’s confidence in achieving a long-term target of more than 2,000 shops by 2029.
At the same time, the company is leaning on transaction-driving initiatives, menu innovation, increased advertising and its Dutch Rewards program, which accounted for 72% of system transactions. Still, maintaining traffic momentum could prove challenging as competition in the beverage category intensifies and consumer spending normalizes.
For now, Dutch Bros is delivering on both growth and profitability, with adjusted EBITDA up 37% in second-quarter 2025. Investors will be watching closely to see if customer traffic can continue to fuel comps as the brand stretches into new geographies.
Competitors Brewing Up Pressure
Dutch Bros’ expansion drive brings it into sharper competition with both established and emerging players. Starbucks Corporation (SBUX), the global coffee leader, continues to leverage its vast scale, menu innovation and a powerful Rewards program to retain customer loyalty. While U.S. traffic has softened recently, Starbucks’ digital reach and pricing power remain key competitive advantages that Dutch Bros must counter with value and localized engagement.
On the regional front, Krispy Kreme, Inc. (DNUT) has been pushing deeper into beverage offerings as part of its strategy to broaden relevance beyond doughnuts. With an increasing emphasis on coffee and specialty drinks, Krispy Kreme is vying for share in similar dayparts where Dutch Bros thrives. Both brands aim to capitalize on convenience-driven demand, but Dutch Bros’ ability to maintain transaction growth will be critical as larger rivals strengthen their hold in overlapping markets.
BROS’ Price Performance, Valuation and Estimates
Dutch Bros’ stock has surged 22.8% in a month against the industry’s decline of 0.2%.
Price Performance
Image Source: Zacks Investment Research
BROS is trading at a premium to the industry, with a forward 12-month price-to-sales of 6.38X. The figure is well above the industry average of 3.78X.
P/S(F12M)
Image Source: Zacks Investment Research
Over the past 30 days, BROS' 2025 earnings estimates have increased to 66 cents per share from 59 cents.
Image Source: Zacks Investment Research
Dutch Bros currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Dutch Bros Bets on New Markets: Will Traffic Trends Keep Up?

Key Points
Lululemon stock is trading 60% below its 52-week high after posting a 7% revenue increase last quarter.
Cava stock is down big this year, but analysts expect earnings per share to triple as it opens more restaurant locations.
The tech-driven bull market has driven up valuations for tech stocks, but this could present long-term investors attractive buying opportunities for top stocks in the consumer goods space.
Lululemon Athletica (NASDAQ: LULU) and Cava Group (NYSE: CAVA) are trading 60% off their previous highs, but analysts on Wall Street see value. The average price target for these stocks is at least 33% above where they currently trade.
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Here's why they are down and might be worth buying ahead of a potential rebound in 2026.
1. Lululemon Athletica
Lululemon Athletica has been a growing brand in the athletic wear market for two decades, but the company is struggling with slowing sales growth and higher costs from tariffs. The stock trades well below its 52-week high of $423.
After three years of higher grocery prices and mortgage rates, consumers are pulling back on discretionary spending. This is not specific to Lululemon, but a lot of consumer brands are taking a hit. Starbucks and Nike have experienced sales pressure over the last year. After growing revenues by double-digit rates a year ago, the headwinds have finally caught up to Lululemon with sales up just 7% year over year in the most recent quarter.
Tariffs have compounded the company's challenges, yet despite this, the company expects revenue growth to remain stable next quarter, rising between 7% to 8% year over year. It also expects full-year earnings per share to come in between $14.58 to $14.78.
Apparel is highly competitive, yet that hasn't prevented Lululemon from building a strong brand over the last 20 years. It's one of the most profitable apparel brands, generating $1.8 billion in profit on $10.8 billion of revenue over the last year, which is an above-average margin of 17%.
Analysts on Wall Street have an average price target of $273 on the shares, representing upside of 33%. The stock does appear undervalued at these levels. Using management's full-year guidance, the shares trade at 14 times forward earnings. This is the lowest valuation the stock has traded in years. Just two years ago, investors were paying around 30 times earnings to own a piece of Lululemon's future growth.
Obviously, sentiment around the consumer goods space will dictate when the stock rebounds. But there is a catalyst that may be coming in the form of interest rate cuts by the Federal Reserve that could provide some relief for consumers and potentially put Lululemon and other discounted retail stocks on a path of recovery over the next year or so.
2. Cava Group
Cava stock rocketed to a high of $172 last year before falling to its current $68 share price. A combination of an extremely high valuation on the stock entering 2025 combined with weak consumer spending trends magnified the stock's recent slide.
Cava is capturing a big opportunity. It is meeting demand for a Mediterranean-based restaurant concept in the fast-casual market. It is still growing at robust rates, with total revenue up 20% year over year in the most recent quarter. But slowing customer traffic, where same-restaurant sales growth slowed to 2.1% year over year, has sent the stock lower.
However, one silver lining in the recent quarterly financial report suggests sales growth could already be in the process of picking up again. Management indicated that same-restaurant sales were reaccelerating toward the end of the last quarter and beginning of the current quarter.
Cava is still investing in a huge market for Mediterranean food. It opened a net 16 new restaurants last quarter. Management still sees room for 1,000 restaurants by 2032, which would more than double its locations from the current 398.
The stock could be bottoming out, as analysts' average price target is currently $92, implying upside of 36%. The stock looks expensive at a forward P/E topping 120 at the time of writing. This is based on the Wall Street consensus earnings estimate of $0.56 for this year. But Cava is a highly profitable restaurant business. As it continues to open new locations and achieve greater scale, analysts expect Cava's earnings to nearly triple over the next four years to $1.57.
From a price-to-sales (P/S) valuation perspective, Cava is more reasonably priced. The stock traded around 15 times sales at the start of the year but now trades at a 7.5x multiple. That's still a rich valuation for a restaurant stock, but it's justified considering Cava is still in the early innings of its nationwide expansion and is already producing a healthy profit for a restaurant business.
The lower valuation and continued execution toward its long-term strategy raise the odds of a rebound next year. If the stock continues to trade at the current P/S multiple and meets next year's consensus revenue estimate for $1.4 billion, the stock would rise 36%.
Should you invest $1,000 in Lululemon Athletica Inc. right now?
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc., Nike, and Starbucks. The Motley Fool recommends Cava Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.