Cava Group Shares Sizzle In First Day Of NYSE Trading

Zinger Key Points
  • Cava Group shares surged in their market debut, opening for trading at $42 a share.
  • The company priced shares at $22, above an earlier expected trading range of $19 to $20.

The first restaurant IPO in some time kicked off with a bang Thursday, as shares of Cava Group CAVA soared from their initial price and saw a surge of interest from traders and investors.

What Happened: Mediterranean restaurant chain Cava sold 14.4 million shares at a price of $22 in its initial price offering, valuing shares at a $2.5 billion market capitalization.

The company originally expected to price its IPO in a range of $17 to $19 and an updated range of $19 to $20 before the shares sold at $22, raising around $318 million in one of the ten largest IPOs of 2023.

Interest in the stock was apparent before the opening, with the ticker trending on social media and media outlets like CNBC covering the debut. Cava company officials were also present at the New York Stock Exchange for the stock's debut.

CNBC anchor and host Jim Cramer made five tweets about Cava on Thursday. The company’s CEO Brett Schulman was interviewed by Cramer and David Faber Thursday.

Shares of Cava opened for trading at $42 at around 11:45 a.m. ET. The debut valued the company at around $4.7 billion and offered a gain of 90.9% for investors who were able to lock in shares at the IPO price.

On Thursday, shares of Cava traded between $40 and $47.79 with a current price of $46.78 at the time of writing, up 112% from its IPO price.

The company has often been compared to Chipotle Mexican Grill CMG given its food style, fast casual style restaurants and build-your-own meals.

Cava acquired Zoes Kitchen in 2018, taking the former publicly-traded Mediterranean restaurant chain private. Cava is working to convert the existing Zoes restaurants to Cava-branded units.

As of April 16, Cava had 263 locations. In 2022, the company had net sales of $564.1 million, an increase of 12.8% year-over-year. First quarter revenue was $203.1 million, up 27.7% year-over-year.

What’s Next: Investors will look to see if Cava can keep momentum on Friday before the three-day weekend, with markets closed Monday for the Juneteenth holiday.

Fast-growing restaurant company Sweetgreen Inc SG went public in November 2021 at $28. The company shared similarities to the Cava IPO, with shares pricing above their range and seeing a big increase in their debut, up 76% on their first day of trading and a $52 price opening. Shares of Sweetgreen have since fallen and trade at $10.50 today.

Chipotle had its IPO in 2006 and the stock, which is up 470% in the last 10 years has been a strong performer since going public, up over 4,700% from its IPO.

One concern from investors is growing losses, with Cava posting a loss of $59 million in 2022, up from a loss of $37.4 million in 2021. A net loss of $2.1 million in the most recently reported quarter was an improvement from a loss of $20 million in the same period in the prior year, showing a potential path to profitability.

Cava expects to use proceeds from its IPO for opening new restaurants.

“We’re focused on our long-term growth, we’ve got a tremendous unit economic profit engine,” co-founder and CEO Brett Schulman told Yahoo Finance.

The company plans to open 34 to 44 new Cava locations and convert another eight Zoes stores to Cava units throughout the rest of the calendar year. Plans call for the company to hit 1,000 units in the U.S. by 2032.

“We’ve put a very reasonable plan out for growth rate,” Schulman told Cramer and Faber. “We want to build this for the next ten years, not the next ten months.”

The strong reception from Cava could spark demand for new IPOs from investors, and also lead to restaurant companies exploring offerings.

Restaurant companies that have filed for IPOs include Fogo De Chao and Gen Restaurant Group. Panera has also been exploring an IPO and a return to the public market.

Related Link: Cava Group IPO Preview 

For the latest on new IPOs and their expected market opening price, follow on Benzinga Pro. 

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Posted In: NewsSmall CapIPOsMoversTrading IdeasCava GroupDavid Faberfast casualFast Casual RestaurantsJim CramerRestaurant stocks
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