Analyst Sees Sweetgreen's New Tech As Major Margin Booster: Upgrades To Overweight, Raises Price Target

Piper Sandler analyst Brian Mullan upgraded Sweetgreen, Inc. SG from Neutral to Overweight, raising the price target to $19 from $13.

SG recently reported Q2 results where revenues rose 22% Y/Y to $152.5 million, missing the consensus of $156.7 million. While it has been "tough sledding" thus far for SG as a public company, the analyst thinks the tide may be turning a bit for SG.

Mullan projects a meaningful improvement in sentiment in the coming months, with margins inflecting.

The analyst thinks that the promise of the automated ordering technology behind the company's Infinite Kitchen location represents something truly idiosyncratic for investors to become enthused about. 

Mullan applauds the technology deployed in the current location in Naperville, which is expected to become a bigger part of the development plans at SG in 2025e and beyond.

While the risks here are certainly higher, Mullan thinks the potential for reward is also more significant.

The deployment of the new technology could represent a ~300 to 350 bps lift to SG's consolidated margins by the end of the decade, leading to a ~20.5% to 21% blended RLM at 600 total stores by 2030.

The hike in price target is predicated on an eventual 1,000 units with an RLM of 20% and non-GAAP G&A at 7.5% of sales.

Reflecting the gross openings cadence and mix of Infinite Kitchens, the analyst predicts that gross openings for the company can be across 600 SG locations by 2030, of which ~26% have the Infinite Kitchen technology deployed. 

Price Action: SG shares are trading higher by 7.7% to $15.19 on the last check Monday.