Prediction: This Beaten-Down Growth Stock Will Soar in August
It’s an understatement to say Sweetgreen (SG +2.67%) has stumbled recently.
The fast-casual salad chain has plunged since it peaked in late 2024, down 86%. Almost everything that could go wrong for the salad slinger has.
Same-store sales have turned sharply negative as concerns about high food prices, a change to its loyalty program, and persistent inflation have all weighed on results. Additionally, the company surprised investors when it sold Spyce, the business containing the Infinite Kitchen, though it retained the right to use that technology, which helps automate food prep.
Showing how bad things have gotten for Sweetgreen, same-store sales fell 12.8% in the first quarter, and revenue was down 2.9% to $161.5 million, as the company continues to open new stores.
However, even as the stock has languished, there are signs that it could be turning the corner.
Image source: Sweetgreen.
Why Sweetgreen could be poised for a comeback
Earlier this year, Sweetgreen introduced wraps as a lower-priced option to push back on complaints that its menu had gotten too expensive and to give customers a handheld option. The move rounds out its menu and, with bowls and wraps, gives it a similar offering to Chipotle and Cava, two top fast-casual chains.
According to some anecdotal observations and third-party data, the wraps appear to be driving a comeback. Placer.ai, a location intelligence platform that estimates foot traffic for national restaurants and retailers, found that Sweetgreen’s same-store traffic turned positive in the second quarter after falling in every month since at least last July. Following an 8.4% decline in March, according to Placer, same-store visits were down 2.9% in April, then up 1% in May, and 3.9% in June.
Placer’s data for the first quarter seemed to underestimate the decline in traffic, which was down 11.2%, so investors should take the numbers with a grain of salt, but the trend is clear. Store traffic dramatically improved in the second quarter, and that clearly bodes well for the business.
In addition to the tailwind from the wraps, Sweetgreen is also lapping a change in its loyalty program that turned off some customers, so comparable sales should benefit as that headwind rolls off.
Today’s Change
(2.67%) $0.16
Current Price
$6.16
Key Data Points
Market Cap
Day’s Range
$6.04 – $6.26
52wk Range
$4.49 – $14.96
Volume
169K
Avg Vol
5.8M
Gross Margin
2.52%
Why Sweetgreen could pop next month
Sweetgreen is priced like a broken stock, but it still has promising growth ahead, and the last few quarters could prove to be a temporary setback. The stock trades at a price-to-sales ratio of just 1, and though it’s not currently profitable, profits shouldn’t be far away if it can get back to steady comparable sales growth. Sweetgreen’s guidance calls for just that, and the Placer.ai data shows the company appears to be ahead of the curve.
If it can deliver positive comps in its second-quarter report on Aug. 6, or just report that it exited the quarter with positive comps, the stock could rip higher. After all, this is still a popular chain, with average sales per restaurant still exceeding $2.5 million.
