New Construct CEO David Trainer says investors should ignore the hype around Cava Group and avoid the stock.
Cava Group, the Mediterranean-focused fast-casual restaurant, has filed for an initial public offering, which is expected in the coming weeks.
“We understand investors may be anxious to find the next hot stock after the IPO drought we have seen over the past 18 months, but investors should look past the hype and avoid Cava’s stock at all costs,” said the report. “Cava Group is not currently profitable and its path to profitability is nonexistent as the company spends money it doesn’t even have to open more stores,” he wrote.
“Don’t get left holding the bag by bailing out the private equity owners of this overvalued and unprofitable fast-casual restaurant,” Trainer wrote, referring to Cava. The company has grown its network of restaurants to 263 in the first quarter of 2023 from 22 in 2016, after acquiring rival Zoës Kitchen in 2018 in a $300 million deal.
The company is going public at an uncertain time, with the U.S. facing a possible recession and the global economy on shaky ground, he said. Astute investors may ask why Cava would want to hit public markets against that background.
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