Sweetgreen inventory is more likely to soar after its blended IPO in late 2021

Jonathan Neman, Nicolas Jammet and Nathaniel Ru, Sweetgreen on NYSE, November 18, 2021

Supply: NYSE

In a 12 months with a spate of restaurant IPO shares, Sweetgreen – one of many late arrivals – may have an thrilling 12 months forward of it, constructing a brand new class due to its know-how investments.

After a tricky 2020, restaurant shares outperformed the next 12 months as vaccinations and relaxed restrictions added investor confidence within the business.

Swept away by that optimism, 5 restaurant firms, together with Krispy Kreme and Dutch Bros, had their preliminary public choices with blended outcomes.

The Sweetgreen salad chain solely made its debut in mid-November and has not but launched any quarterly outcomes. It went public at $ 28 per share – up 76% on its first day of buying and selling – however has since fallen on fears in regards to the Covid-Omicron variant. It traded at round $ 32 per share on Friday afternoon.

Nonetheless, some watchers see a variety of upside for the inventory in 2022.

“Sweetgreen is within the early phases of making a brand new class within the restaurant business, a chance that comes roughly each ten years after the. IPOs [Starbucks] 1992, [Chipotle Mexican Grill] in 2006 and [Wingstop] in 2015, “Cowen analyst Andrew Charles wrote in a December 13 buyer notice.

Moreover, Sweetgreen has two key elements for the longer term: consumer-centric know-how and clear meals sourcing, mentioned Charles.

Sweetgreen is the primary fast-casual salad chain to go public, however it in all probability will not be the final. A flurry of rivals like Chop’t, Simply Salad and Dig are ready within the wings with thousands and thousands of {dollars} in fundraising.

Goldman Sachs analyst Jared Garber initiated the inventory as a purchase with a goal worth of $ 48 per share and mentioned that regardless of its small measurement, the corporate is on the forefront of know-how innovation and integration within the restaurant business. Greater than two-thirds of Sweetgreen’s gross sales come from digital transactions, and the corporate purchased robotics firm Spyce in early 2021.

For Sweetgreen traders, the principle query is whether or not it will possibly broaden past its core markets into the suburbs earlier than its rivals change into an even bigger risk to its market share.

Morgan Stanley analyst John Glass additionally wrote in a notice to his shoppers that Sweetgreen’s unprofitability might be a priority for some traders, as a lot of the publicly traded eating places are worthwhile.

In 2021, Sweetgreen bounced again from pandemic lows, decreasing losses from $ 100.2 million the earlier 12 months to $ 86.9 million on September 26. Gross sales in the identical retailer elevated by 21% throughout this era.

Subsequent 12 months is predicted to see extra IPOs within the restaurant business, with PF Chang reportedly in talks in regards to the IPO and Panera Bread saying in November that it’ll return to the general public markets.