Cava stock price forecast: Be fearful when everyone is greedy

Cava (NYSE: CAVA) stock price has gone parabolic in the past few days as demand for the stock jumped. The shares surge to an all-time high of $52, which was much higher than the IPO low of $22. This makes it one of the best-performing stocks in the US in the past 30 days.

Can these gains hold?

Cava Group is a fast-growing Mediterranean fast-casual company that operates hundreds of stores in the country. The company’s annual revenue jumped from $45.4 million in 2016 to over $564.1 million in 2022. 

And analysts expect that the company’s revenue will surge to over $1 billion in the next few years. Cava Group’s market cap has jumped to more than $5.6 billion. This rally is happening as investors compare the company’s growth to that of Chipotle Mexican Grill (CMG), a company that is now valued at over $60 billion.

Still, there are concerns about the current rally of the CAVA stock price. Having looked at hundreds of IPOs in the past, I believe that this rally is happening because of fear of missing out (FOMO). 

FOMO happens when many investors, including institutional ones, buy a stock when its price is rising. We have seen FOMO happen many times, including during the meme stock frenzy of early 2021.

FOMO events don’t end well. Bed Bath & Beyond has already gone bankrupt and companies like ContextLogic, Sundial Growers, and AMC shares have tumbled. Therefore, I suspect that the shares will retreat in the coming weeks as the momentum fades.

Analysts have also started covering the stock with a bullish tone. William Blair analysts initiated their coverage with an outperform rating. Other analysts at Piper Sandler, Baird, Morgan Stanley, Stifel, and Jefferies have also upgraded the stock with an average target being at $45. 

CAVA stock price forecast

CAVA chart by TradingView

The hourly chart shows that the Cava Group share price has been in a strong bullish trend in the past few days. It has moved from the IPO level of $22 to over $52. Along the way, the shares have moved above the important resistance point at $47.86, the highest swing on June 27th.

Therefore, as warned above, I suspect that the shares will retreat in the coming weeks as the bullish momentum waned. If this happens, the stock will likely drop and move to the support level at $45.