$CAVA – DECEMBER SHORT PLAY (Potential Crash and/or Death Spiral)

The company had a successful IPO in mid-June of 2023. Shares opened at $42 apiece on the NYSE, nearly double the IPO price of $22. Cava sold about 14.4 million shares in the offering, raising around $318 million.

As more investors try to realize their profits and there are minimal number of buyers, the stock might enter a free fall for a while. Also, other institutions would want to come in at a much lower level, so they will not interfere for a while.

IMO, by every measure the company is currently is overvalued. With the last quarter revenue of $175.55 million and negative net income, the company’s current free float valuation stands at over $4B with a P/E ratio of over 460! CAVA is expected to have about $850M of revenue in 2024 with about 9% EBITDA margins, but only 1.5% net income margins, which at best would make it a $1B company and that is everything goes perfect by the end of next year, which again would equate to about $9/share (in the future).