February 19, 2025
Should you buy Cava and Palantir after today's plunge?
No. Although both are good companies, they are significantly overpriced. You should patiently wait for a 20% to 25% price drop before considering adding them to your portfolio.
Today, February 19, 2025, Cava and Palantir had very bad days in the stock market. Each company lost about 10% in value in just one trading day. Cava and Palantir are both good companies, but are both overpriced. The stocks will most likely continue experiencing some heavy winds in their respective industries in the days ahead. Cava is currently trading at $119 per share. Palantir is trading at $107 per share, You should consider adding them to stocks on your radar. Once their share prices go well below $100 each, you may want to consider adding a few shares here and there (not too many and not too quickly) to your portfolio.
Cava Group, Inc. (NYSE: CAVA)
Cava Group, Inc. (NYSE: CAVA) lost 10.42% today. The restaurant's stock is still up 120% in the last 12 months. If the stock loses 20% more, it would be an excellent buy. Cava is a fast-casual Mediterranean restaurant chain based in Washington, D.C., known for its customizable bowls and pita sandwiches. You can think of it as the Mediterranean version of Chipotle. The company operates 379 locations including what used to be Zoe's Kitchen, which the company acquired in 2018.
Cava priced its initial public offering (IPO) at $22.00 per share on June 14, 2023. The stock began trading on the New York Stock Exchange on June 15, 2023, opening at $42 per share, nearly doubling its IPO price. Cava's stock reached an intraday high of $133.45 and a low of $117.84, closing at $119.42. The company's all-time intraday high stands at $172.43, achieved on November 13, 2024.
Cava's current market capitalization is approximately $13.68 billion, which we believe is about 20% overvalued. Cava's trailing twelve-month revenue stands at $913.49 million. The company's P/E ratio is 262, which we consider too high.
The consensus among analysts is a "Moderate Buy," with an average 12-month price target of $142.13, suggesting a potential upside of approximately 19% from its current price of $119. In the past, the company has consistently surpassed earnings expectations, driven by successful menu innovations and strategic expansions. People eat a lot and the idea of a Mediterranean version of Chipotle was well received. However, some analysts express caution due to its high valuation metrics compared to industry peers. The average P/E ratio in the restaurant sector is 30. Cava's is almost 9 times that.
Bad news on the horizon? Cava is scheduled to release its fourth-quarter and full-year 2024 financial results on February 25, 2025, after market close. Either a leak or negative anticipation of this report could have contributed to today's 10.42% plunge in Cava's stock. We think that things will get a little worse for Cava before they improve later.
Creatix recommends staying away from Cava until its share price drops to at least $100 per share. That would be a 20% decrease from today's value and could take about 6 months to materialize if Cava appears to struggle a little with moderate sales and high operating costs. Eventually and for the long run, Cava should be a good investment for those who are patient and find a good entry point. For those who may be currently holding Cava, recommendation would be to seriously consider selling at this point for a possible re-entry later on.
Palantir Technologies Inc. (NYSE: PLTR)
PLTR experienced a notable 10% decline in its stock price today, February 19, 2025. Palantir is a data analysis company, currently employing AI for predictive intelligence and surveillance assistance sold to the federal government and certain private industries.
The Pentagon announced today a plan to cut defense spending by 8% annually in the next five years. This development has raised concerns about potential impacts on defense contractors like Palantir, contributing to the stock's decline. In addition, Palantir CEO Alex Karp is planning to sell almost 10M shares by within the next seven months. This structured sale has raised questions among investors, possibly influencing today's stock performance.
Palantir's stock price has increased nearly nineteen-fold since the end of 2022. Along with Nvidia, Palantir is the poster child of the AI boom or bubble in the U.S. stock market. As of February 19, 2025, Palantir Technologies Inc. (PLTR) has a market capitalization of approximately $256.03 billion. The company's trailing twelve-month (TTM) price-to-earnings (P/E) ratio stands at 589.79. Yes, almost 600!
Analysts have expressed concerns about the sustainability of this growth, citing high valuation metrics and potential for slower future growth rates. Investors should consider these factors, along with Palantir's high valuation metrics, when evaluating the stock's potential. We would stay away from PLTR until it reaches a share price below $75. That would be a drop of about 25% from today's price of $107.
Both Cava and Palantir are good companies, but are significantly overpriced. Once their share prices go down 20% to 25%, they will be once again worthy of consideration. In the meantime, it is better to avoid them.
Now you know it.
www.creatix.one
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