CAVA Stock Slips 15% in 3 Months: Should You Buy, Sell or Hold?

Shares of CAVA Group, Inc. CAVA have declined 15% in the past three months compared with the Zacks Retail – Restaurants industry’s dip of 0.8%. Over the same timeframe, the stock has underperformed the Zacks Retail-Wholesale sector and S&P 500’s rise of 0.9% and 3.9%, respectively.

Investor sentiment surrounding CAVA has been weighed down by near-term sales uncertainty and margin concerns. Industrywide food-safety concerns temporarily affected sales, while higher input costs, labor investments and growth-related spending have added pressure on profitability. Although demand has begun to recover, lingering macroeconomic uncertainty and limited near-term pricing action have likely added to investor caution.

CAVA’s Three-Month Price Performance

Image Source: Zacks Investment Research

From a technical perspective, CAVA is trading below its 50-day moving average, indicating weak near-term technical momentum.

CAVA Stock Trades Below the 50-Day Moving Average

Image Source: Zacks Investment Research

The recent pullback may appear attractive, but near-term operating pressures keep the risk-reward profile balanced. Is the stock worth buying at current levels? Let’s assess.

What’s Pressuring CAVA Stock?

Recent industry food-safety concerns showed that external events can disrupt CAVA’s sales even without a direct sourcing link. The company stated that concerns surrounding the Cyclospora outbreak affected same-restaurant sales exiting the second quarter of 2026.

Margin pressure presents another concern. CAVA’s restaurant-level margin contracted 60 basis points year over year to 25.7%, as operating costs outpaced the benefits of sales leverage. Food, beverage and packaging costs increased 50 basis points year over year to 30% of CAVA revenues, largely due to input costs associated with the salmon launch. Fuel surcharges and the pre-marinated chicken rollout are expected to keep the cost line elevated during the remainder of fiscal 2026.

Labor and operating expenses remain elevated. Labor costs increased 30 basis points year over year to 25.3% of CAVA revenues, as a 3% incremental wage investment was partially offset by sales leverage. Other operating expenses rose 40 basis points year over year to 12.8%, primarily due to a higher third-party delivery mix. Continued cost pressure could restrict incremental profit flow-through as CAVA expands its restaurant base.

CAVA’s measured pricing strategy adds another layer of pressure. With no near-term price increase planned, the company has less flexibility to offset inflationary costs through pricing. While this approach supports accessibility and traffic, softer demand or persistent cost inflation could make protecting margins and sustaining earnings growth more challenging.

Can CAVA Regain Its Momentum?

Despite near-term volatility, CAVA believes it is positioned to benefit from consumer demand for fresh, protein-rich and Mediterranean-inspired meals. The company continues to strengthen its brand through culinary innovation and investments in the guest experience. The nationwide launch of Pomegranate Glazed Salmon and ongoing development of roasted garlic shrimp could broaden menu appeal and support customer acquisition.

CAVA’s value proposition represents another important growth driver. Restaurants located in lower-income markets are generating the strongest same-restaurant sales performance, indicating that the brand’s appeal extends beyond higher-income consumers. By limiting menu-price increases and preserving accessibility, CAVA is seeking to sustain traffic and broaden its customer base.

CAVA has also expanded engagement through its loyalty platform and experiential marketing initiatives. Flavor Passport encourages customers to explore the menu and earn rewards, while seasonal offerings and community-focused events provide additional reasons to visit. The loyalty member base is growing faster than the restaurant footprint, strengthening CAVA’s ability to deepen customer relationships and encourage repeat visits.

A robust development pipeline further supports CAVA’s long-term outlook. New restaurants continue to exceed internal sales and margin expectations, reinforcing the concept’s portability across established and emerging markets. Planned expansion into additional regions, supported by strong unit economics, a debt-free balance sheet and ample liquidity, provides a solid foundation for sustained restaurant growth.

CAVA’s Valuation and Competitive Landscape

CAVA trades at a forward 12-month price-to-sales multiple of approximately 4.25X, above the industry average of 3.26X and the respective multiples of 3.42X and 1.64X for Chipotle Mexican Grill, Inc. CMG and Shake Shack Inc. SHAK. Although CAVA’s valuation is below its two-year median, the premium places a high bar on sustained traffic growth, new-unit productivity and execution.

Image Source: Zacks Investment Research

Chipotle reported second-quarter comparable-restaurant sales growth of 2.2%, including 1% transaction growth, while restaurant-level margin contracted 220 basis points to 25.2%. The company opened 101 restaurants and remains on track for approximately 350 openings in 2026. Its Recipe for Growth strategy, Rewards initiatives and high-efficiency equipment rollout contributed to transaction and throughput improvements during the quarter.

Shake Shack delivered 3.5% same-Shack sales growth, including 2% traffic growth, but its restaurant-level margin declined 90 basis points to 23% amid elevated beef costs. The company continues to expand through company-operated and licensed locations, although cost pressures are expected to keep full-year adjusted EBITDA and net income near the lower end of their respective outlook ranges.

CAVA’s 9% same-restaurant sales growth and 5.3% traffic increase exceeded the gains reported by both peers, while its 25.7% restaurant-level profit margin remained competitive on the companies’ respective reported bases. However, Chipotle’s greater scale and Shake Shack’s expanding footprint reinforce the need for CAVA to preserve its growth and unit economics.

Meanwhile, the Zacks Consensus Estimate for CAVA’s 2026 earnings has declined during the past 60 days, while the metric is projected to remain roughly flat year over year. Higher taxes, operating costs and growth-related investments may constrain near-term earnings expansion.

Image Source: Zacks Investment Research

CAVA’s Investment Verdict: Hold for Now

CAVA’s strong traffic trends, productive restaurant openings, culinary innovation and expanding loyalty base support its long-term growth prospects. The company’s debt-free balance sheet and ample liquidity also provide the financial flexibility to fund continued expansion. However, food-safety-related demand uncertainty, rising operating costs and limited near-term pricing action could pressure margins and earnings growth.

The stock’s premium valuation, declining earnings estimates and weak near-term technical setup reduce the appeal of buying the recent dip. Against this backdrop, retaining this Zacks Rank #3 (Hold) stock appears appropriate for existing shareholders. Prospective investors may prefer to wait for a better entry point.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research