CAVA Stock Rises After Morgan Stanley Upgrades to 'Overweight'

CAVA Group Inc. (NYSE:CAVA) shares rose as much as 3% in early trading on Wednesday after Morgan Stanley upgraded the stock to Overweight from Equalweight. The investment bank also raised its price target on the fast-casual restaurant chain to $90 from a previous $86 per share.

Analyst Cites Favorable Entry Point

The upgrade follows a recent period of weakness for CAVA's stock, which closed at $69.97 on Tuesday. Morgan Stanley analyst Brian Harbour said the pullback, which he attributed to softer credit card data, presented an attractive opportunity for investors.

"We don’t have concerns about longer-term fundamentals and have long had a positive bias towards the story, 2Q should be on track, and FY guidance on track," Harbour stated in a note to clients. The new price target suggests significant upside from the stock's recent levels.

Strong Fundamentals Underpin Thesis

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Morgan Stanley highlighted CAVA's standout position among growth-oriented restaurant stocks. The bank expressed confidence in the company's performance across several key metrics.

According to the analyst, CAVA is one of the few names in the sector where the outlook is positive for the most important Key Performance Indicators (KPIs), including:

• Traffic growth
• New unit growth
• New store performance
• Margin visibility

While acknowledging that the stock's valuation is not cheap even after its recent decline, Harbour called it "defensible, because it remains one of the strongest fundamental stories in restaurants." The firm's price target is based on EV/EBITDA multiples and supported by a discounted cash flow (DCF) analysis.