$Sweetgreen (SG.US)$ shares are off 8% in afternoon trading. The big question is why but a closer look may provide some clues.
The company has had a good run in 2024, with its stock soaring over 210% year-to-date. The fast-casual chain, known for its fresh salads, eco-friendly practices, and tech-forward approach, is attracting both customers and investors alike.
Digital sales now account for 55% of its Q3 revenue, and the company has seen a 19.7% increase in sales over the past three quarters, riding the growing demand for healthier dining options. With expansion for 40 new locations next year, including the futuristic Infinite Kitchen concept, Sweetgreen’s growth trajectory looks promising.
But a closer look beneath the surface shows concerns. The company posted a $20.8 million net loss in Q3, and its annual per-store revenue has remained flat at $2.9 million. Insider selling by CFO Mitch Reback and co-founder Nicolas Jammet also raises questions about their confidence in Sweetgreen’s $4 billion valuation.
Trading at 6.4x price-to-sales, the stock has surged 200%, leaving little room for error if growth slows. Analysts are mixed: TD Cowen sees strong potential with Sweetgreen’s expansion and tech innovations, while KeyBanc Capital Markets cautions against its inflated valuation and unproven profitability. While Sweetgreen’s momentum is undeniable, the real challenge lies in sustaining this growth.
