Investing

Meet the Stock That's Tripled in 2024-- Is It Still a Buy?

Joey Frenette

Published: October 2, 2024 8:59 am

With the year’s third quarter in the record books, growth investors may be wondering which firms have been standout performers. Undoubtedly, not all growth firms have been able to proceed higher following the late-summer turbulence.

As our worries shift from overheated inflation, how hard the economy will land, and the Fed (they’re a friend of the investor now that they’re in rate-cutting mode) to the crisis in the Middle East and the impact of the dockworkers strike across the East and Gulf coasts, the setup for the fourth quarter isn’t looking all too bright.

In any case, there are some fast-rising growth companies that have such powerful trajectories and narratives that they may just continue to stand tall as the rest of the market wobbles in the final quarter of 2024. In this piece, we’ll check in with a stock that’s tripled year to date and is showing few signs of slowing down as we march into what’s sure to be a rocky end to the year.

Key Points About This Article

• CAVA stock is one of the hottest stocks in the market as we head into Q4.
• The company seems to remind some analysts of a young Chipotle Mexican Grill. It’s not hard to see why.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

CAVA: Analysts Say It’s the Next Coming of Chipotle. They Could Be Right.

Enter shares of Mediterranean restaurant chain CAVA Group (NYSE:CAVA), which have tripled so far in 2024 and quadrupled over the past year. Indeed, it’s the new red-hot momentum stock in town, with some Wall Street analysts referring to the still-relatively small quick-serve restaurant as the next Chipotle Mexican Grill (NYSE:CMG).

Head over to your local CAVA, and you’ll discover many similarities with the Chipotle experience. You’re getting a delicious (but still healthy) bowl made with fresh ingredients at a cost that some of the more health-conscious consumers out there see value in. Even amid inflation and industry-wide pressures, CAVA has found a way to take market share by offering a unique experience (and flavors) for the crowd willing to pay more for higher-quality of fast (casual) food. That’s a testament to just how good CAVA’s management team is.

Indeed, CAVA has captured the hearts of diners. However, the big question is whether it can scale the success as it “floors it” on expansion efforts. Thus far, it’s done a fantastic job of scaling up, but the most ambitious push has yet to come. Personally, I think CAVA can continue swinging home runs as it eyes more ambitious longer-term growth targets.

The market opportunity is massive for the $14 billion company if it is to experience a Chipotle-like growth spurt over the coming years. Up ahead, Cava is shooting to expand to 1,000 locations by 2032. That’s an aggressive expansion that may remind some of Chipotle back in the day.

There are Risks to Consider as CAVA Scales Up.

Only time will tell if CAVA can continue to grow at such a blistering pace as Chipotle did more than a decade ago. All signs suggest that CAVA is firing on all cylinders as it stays on the hyper-growth track. That said, there are risks to the growth story that could weigh on the firm’s growth plans.

Specifically, CAVA needs to continue building a name for itself while maintaining a level of quality that could prove tougher as the firm scales to 1,000 locations. Indeed, the company can certainly learn from Chipotle’s mistakes (think the E.Coli scandal a few years ago and, more recently, the portion skimping publicity).

If CAVA can triumph where Chipotle has stumbled in its rise to becoming a nearly $80 billion company, the hot quick-serve restaurant chain may just be the next Chipotle or maybe even a firm that dethrones Chipotle.

CAVA Stock is Getting Incredibly Expensive, Too.

The big question, however, is whether it’s too late to get in on the generational growth play. Despite tripling in 2024, the stock is starting to come in again, now off around 5% from its all-time high. Any past breathers in the stock have proven great buying opportunities.

However, as is the case with high-momentum stocks, things can turn suddenly. So, unless you’re ready for some Nvidia (NASDAQ:NVDA) magnitude of volatility, there’s a good chance you could get woozy by picking up CAVA shares at north of $120 per share.

At writing, CAVA stock goes for 270.3 times forward price-to-earnings (P/E) and 16.8 times price-to-sales (P/S). Such a hefty valuation sets a very high bar for growth. Whether it’s too high a bar, though, remains the multi-billion-dollar question. Though I’m a believer in the CAVA story, I’d be more interested should the stock be in for a more sizeable pullback in the fourth quarter.