According to a new Securities and Exchange Commission (SEC) filing reported on Fintel, investment manager T. Rowe Price (NASDAQ:TROW) has obtained an 11% stake in Cava (NYSE:CAVA), which owns and operates Mediterranean casual dining restaurants. Meanwhile, yesterday multiple analysts released very upbeat notes on CAVA stock.
CAVA’s price took a tumble after the market opened but still sits 1% in the green as of this writing.
More About T. Rowe Price’s Purchase
The 13G filing by TROW shows that the investment manager had accumulated 12.67 million shares of CAVA, giving it an 11.1% stake in the restaurant owner. As of yesterday’s market close, the stake was worth about $557.5 million.
Several Analysts Were Upbeat on CAVA Stock, but Two Were Cautious
JPMorgan and investment banks Stifel, William Blair, and Jefferies all issued bullish notes on Cava yesterday. Among the positive catalysts cited by the banks were the company’s “large addressable market,” its powerful brand, good balance sheet, and profitable, restaurant-level operations.
Morgan Stanley and Citi were more cautious and started coverage of the name with an “equal weight” rating and a “hold” rating, respectively. Both firms cited the stock’s elevated valuation following its rally in recent weeks as a reason to hold off on buying the shares.
My Take on Cava
In a June 21 column, I noted that “Cava reported a net loss of $59 million for 2022, and it has warned that its costs will increase in the coming years as it launches new restaurants. “I also reported that I had viewed “fast-casual Mediterranean restaurants, owned by various companies, in nearly every American city in which I’ve lived or visited over the last decade.” Consequently, I think that Cava, which can also be seen as competing with the plethora of fast-casual American restaurants, is facing a huge number of rivals.
Additionally, the shares are now changing hands at a rather large trailing price-sales ratio of 7.5.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
