On Friday, RBC Capital Markets adjusted its outlook on Sweetgreen Inc (NYSE: SG), a fast-casual salad chain, by increasing its price target to $35 from the previous $20 while maintaining an Outperform rating.
This change follows Sweetgreen's reported earnings, which surpassed expectations for both revenue and profit in the first quarter. The company's comparable store sales exceeded estimates by 200 basis points, a notable achievement despite challenges such as adverse weather and holiday-related headwinds.
Sweetgreen's performance was bolstered by the success of its two Infinite Kitchen concepts, which delivered restaurant-level margins that were significantly higher than the company's average, by 1000 basis points.
Looking forward, Sweetgreen has announced plans to expand its innovative Infinite Kitchen concept by opening seven new locations and retrofitting an additional three to four within this year.
Additionally, Sweetgreen has made a new addition to its menu with the nationwide launch of a steak option earlier this week. This new offering is not factored into the company's current guidance. Despite the strong first-quarter results, Sweetgreen has opted to keep its full-year guidance largely unchanged, excluding the positive impact from the first quarter's performance.
The company's current quarter-to-date comparable store sales are tracking slightly ahead of the high end of their guidance. In light of these developments, RBC Capital has revised its estimates for Sweetgreen and raised the price target to reflect the company's growth prospects and recent operational successes.
InvestingPro Insights
As Sweetgreen Inc (NYSE: SG) garners positive attention from RBC Capital Markets, real-time data and InvestingPro Tips provide a deeper dive into the company's financial health and market performance. The company's market capitalization stands at $2.67 billion, emphasizing its substantial presence in the fast-casual dining sector. Despite a challenging profitability outlook, with a P/E ratio of -21.96 and an adjusted P/E ratio for the last twelve months as of Q4 2023 at -26.02, Sweetgreen's revenue growth has been robust, at 24.24% for the last twelve months as of Q4 2023. This growth trajectory is further highlighted by a quarterly revenue increase of 29.06% in Q1 2023.
InvestingPro Tips suggest that while Sweetgreen has weak gross profit margins of 17.98%, the company's liquid assets surpass its short-term obligations, indicating a degree of financial stability. Additionally, the stock has experienced a strong return over the last three months, with a 94.87% price total return, and an even more significant uptick of 164.13% over the last six months. This volatility may be of interest to investors looking for dynamic growth opportunities.
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