Why Sweetgreen stock exploded today
The company is on track to achieve its first full-year adjusted profit.
Shares of salad restaurant chains sweet green (S.G. 39.47%) It surged on Friday after the company beat overall expectations for the first quarter of 2024. As of 10 a.m. ET, Sweetgreen shares were up a whopping 40%, hitting a 52-week high.
Sweetgreen is off to a strong start to the year.
Sweetgreen underestimated and overdelivered in the first quarter. The company opened six new restaurants during the quarter, and same-store sales increased 5%, against management’s 3% guidance. This resulted in first quarter revenue of $158 million, which at best was better than management’s guidance of $154 million.
Higher sales improved Sweetgreen’s restaurant-level profit margins in the first quarter. Restaurant-level profit margins in the first quarter were 18%, a meaningful increase from 14% a year ago. This resulted in positive adjusted earnings before interest, taxes, depreciation and amortization (USD 100,000).
Adjusted EBITDA profits aren’t much for Sweetgreen. That said, the company expects to turn a profit for adjusted EBITDA for the first time this year. Investors are therefore encouraged by the notion that Q1 will set the pace for the rest of the year.
Did Sweet Green really have accommodations? that good?
I did a double take on Sweetgreen stock this morning. I’m not surprised to see that. But a 40% jump is surprising. Management raised its full-year revenue target from $660 million to $675 million. However, this represents a guidance increase of less than 1%. A 40% jump seems inadequate in comparison.
It was definitely a good quarter for Sweetgreen. But with a current market capitalization of $3.7 billion, the stock is priced at nearly six times projected 2024 sales. That’s a bit on the expensive side, and I wouldn’t be surprised if the stock gives back some of today’s gains.
Of course, the long term is a different story. Sweetgreen is growing in popularity and its restaurant-level financials are strong. If the company can sustain this as it opens new locations, it could still be a good investment.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Sweetgreen. The Motley Fool has a disclosure policy.
