In 2023, we’ve heard the word “IPO” pretty rarely. That was until, restaurant chain Cava went public and pushed to get the word out. The company's stock doubled on the first day on the New York Exchange. Let’s find out more about Cava, its plans for the future, and see whether the newbie can repeat the success of Chipotle.
Actually, Cava is not really a newbie. The company was founded in 2006 and opened its first fast-casual restaurant in 2011. Now the chain has more than 260 locations where you can get a taste of Mediterranean cuisine and for at least 30 minutes feel like you’re sitting on a lost-on-a-sea Greek island (okay, maybe you’re just eating something tasty in pita).
Cava's IPO began with an offering price of $22 per share, which surged to $43.78 by the end of the first trading day – that’s 99% growth and the best opening-day performance for a US IPO in almost two years. You can see an adjustment in the chart below – volatility often accompanies the first public days and weeks.
Also, we know finding suitable stocks for your portfolio might be challenging, but tools like stock screener assist experienced investors and traders in searching for assets based on specific criteria. Who knows, perhaps Cava might make it onto your list as well.
As a result of the IPO, the company sold 14.4 million shares and raised $318 million. Cava is going to spend this money on general corporate purposes and, of course, business scaling. The company plans to open new restaurants in 22 new states, with a target of reaching 1,000 locations by 2032 – a fourfold increase.
Now we should say a couple of words about the financials. On the one hand, Cava's net sales experienced a notable increase of $564 million, indicating a 13% growth. On the other, losses also escalated from $37 million in 2021 to $59 million in 2022. Besides, in Q1 2023, the numbers are much better – a net loss of $2.1 million compared to $20 million in Q1 2022. This trend suggests potential profitability in the near future.
But so far, experts advise adopting a wait-and-see approach with Cava’s stock. Even when assets have good long-term prospects, the first weeks in markets can be too risky and volatile. Probably for now, it may be wise to add Cava’s stock to your watchlist and monitor developments while enjoying a glass of cava.
Cava’s IPO may have significant implications for markets. Its intriguing opening-day performance can inspire other companies to go public. And if the stock maintains positive results over an extended period, we might witness more restaurant companies in the industry following suit and entering the IPO arena, inspired by their Greek cuisine competitor.
