A recent change in the rating of Sweetgreen Inc.’s stock by a Bank of America analyst sent the company’s share price upward.
Bank of America Securities Analyst Katherine Griffin in a research report this month upgraded her rating on the stock of the West Adams-based restaurant chain owner from neutral to buy and the target price from $9 to $17.
It was a move that investors liked, as the share price jumped by 15% to close at $15.06 on July 6. The share price closed at $15.26 on July 20, an increase of about 76% since the start of the year, when shares closed at $8.65.
According to an article posted at investor website Zack’s on July 7, investors’ confidence in Sweetgreen has been increased by guest traffic, its newly launched loyalty program, Sweetpass, and an expansive menu offering.
“Moreover, menu-price increase and restaurant expansion initiatives also bode well,” the website said.
The company’s growth plans include having 1,000 restaurants by 2030 as well as opening more of its Oupost locations – kiosks located in office buildings, apartment complexes and hospitals where it delivers for free its food to customers.
Bloomberg said in a story earlier this month that Bank of America’s bullish upgrade is a vote of confidence for Sweetgreen amid generally mixed views from Wall Street.
“The chain has five buy ratings, not including Bank of America, four hold ratings and one sell, according to data compiled by Bloomberg,” the financial wire service reported.
The jump in the company’s stock price preceded Griffin’s rating upgrade.
After reporting a narrowed net loss and a boost in revenue in early May, shares in Sweetgreen rose by nearly 13% from a close of $7.93 on May 4 to $8.94 the following day.
On May 4, the company reported a net loss of $33.7 million (-30 cents a share) in the quarter ending March 26, compared with a net loss of $49.7 million (-45 cents) in the same period of the previous year. Revenue increased by 22% from the first quarter of the prior year to $125 million.
Sweetgreen will release its second quarter financials on July 27.
Brian Bittner, an analyst with Oppenheimer & Co. in New York, noted in a research report on Sweetgreen published on May 5 that the company’s business appears to be improving and gaining health, as the first-quarter results were mostly in line with guidance.
Additionally, management reiterated its full-year outlook for sales and margins while raising earnings before interest, taxes, depreciation and amortization, including one-time gains, Bittner said.
“We believe this represents a step in the right direction after a few quarters of underperformance relative to expectations,” Bittner said.
With the company’s first automated food-making line set to debut in early May, it represents an opportunity to transform the business model through enhanced throughput and by reducing labor, he said.
“While early, we are excited about the unique catalyst for technology to structurally elevate unit economics over the long term,”
Bittner added.
