Morgan Stanley Upgrades CAVA to Overweight, Raises Price Target to $90

According to CNBC, Morgan Stanley upgraded CAVA Group to overweight from equal-weight and raised its 12-month price target to $90 from $86, implying 29% upside from Tuesday's close. Analysts led by Brian Harbour said in a 108-page industry review that while CAVA is not a cheap stock even after recent weakness, its valuation is defensible due to strong fundamentals including traffic growth, unit growth, new store performance, and margin visibility. The stock had fallen nearly 21% over the past three months amid stagnating same-store sales growth, but Morgan Stanley said it has no concerns about longer-term fundamentals, noting that the second quarter and full-year guidance remain on track. CAVA trades at over 44 times enterprise value to EBITDA, which the bank said is justified by menu innovations and high customer loyalty.