Why Cava Stock Was Down 23% in Q1 as the S&P 500 Had Its Worst Quarter Since 2022

Cava Group (NYSE: CAVA) stock plunged 23% in the 2025 first quarter, according to data provided by S&P Global Market Intelligence. The market wasn't enthused about its 2025 outlook, and that was followed up by fear in the markets about the coming tariff program. Younger, riskier stocks typically fall when the market runs to safe stocks.

What's happening at Cava

Cava is a fast-casual restaurant chain that's getting a lot of attention from investors. It's becoming very popular where it already has locations, but it only has 367 as of the end of 2024, which means it could skyrocket as it adds more stores. That's whetting investor appetites.

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It's been performing well across metrics. Revenue increased 33% year over year in 2024 driven by a 13% increase in same-store sales. Restaurant-level profit increased 34%, and restaurant-level profit margin expanded by 0.2 percentage points to 25%. Net income increased from $13.3 million to $130.3 million, and free cash flow purned positive at $52 million.

Because it's so new, it's been built with digital as a major part of its model, and digital sales accounted for more than 36% of the total. The concept of premium food with a robust digital ordering system is resonating with customers.

Although it has few stores, Cava is expanding into new regions and already has a presence through most of the Southern U.S. Some of its newer locations are in South Florida, Pittsburgh, and Chicago, and it's moving north and east.

Cava stock originally started to fall after the fourth-quarter report because the market wasn't pleased with its outlook. Management is guiding for same-store sales to increase about 7%, or about half of last year's growth, and it's expecting its restaurant-level profit margin to be roughly flat.

The market's in turmoil

All of that loses some significance in today's market, since right now a lot of the market's moves are fueled by fear. I had surmised that Cava stock was on the upswing, but it's been swinging wildly today along with the market. As of this writing, it's down 29% year to date.

At the current price, Cava stock trades at a forward one-year P/E ratio of 108. That's still not super cheap, and with the market in turmoil right now, investors may want to hold off on risky stocks unless you have a high conviction in its future. In Cava's case, it may indeed have bottomed out, but things could keep changing.

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool recommends Cava Group. The Motley Fool has a disclosure policy.