Sweetgreen stock is one to watch in 2022 after this year’s IPO

Sweetgreen stock is one to watch in 2022 after this year's IPO

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

Supply: NYSE

In a yr that was sizzling for restaurant IPO shares, one of many late entries might have a extra thrilling yr forward, constructing a brand new class and displaying the ability of tech investments.

After a tough 2020, restaurant shares carried out higher this yr as vaccinations and loosened restrictions lifted traders’ confidence within the phase. Swept up in that optimism, 5 restaurant corporations, together with Krispy Kreme and Dutch Bros, selected to go public by way of preliminary public choices with blended outcomes.

Sweetgreen solely debuted in mid-November, and it hasn’t even had the possibility to report quarterly earnings but. The salad chain priced its preliminary public providing at $28 a share. The inventory soared 76% in its first day of buying and selling however has since fallen 35% amid fears over the omicron variant. Nonetheless, some are excited concerning the inventory and its future.

“Sweetgreen is within the early phases of making a brand new class within the restaurant {industry}, a possibility that comes alongside roughly as soon as each decade following the IPO’s of [Starbucks] in 1992, [Chipotle Mexican Grill] in 2006 and [Wingstop] in 2015,” Cowen analyst Andrew Charles wrote in a be aware to shoppers on Dec. 13.

Sweetgreen is the primary fast-casual salad chain to go public, however it doubtless will not be the final. A flurry of different opponents, like Chop’t, Simply Salad and Dig, wait within the wings with tens of millions of {dollars} from fundraising.

Charles additionally mentioned that the salad chain is the restaurant firm that finest ties collectively two industry-wide traits: consumer-facing expertise and clear meals sourcing.

Goldman Sachs analyst Jared Garber initiated the inventory as a purchase with a $48 per share value goal, saying that the corporate is on the forefront of technological innovation and integration within the restaurant {industry}, regardless of its small measurement. Greater than two-thirds of Sweetgreen’s gross sales come from digital transactions, and the corporate purchased robotics firm Spyce earlier this yr.

For Sweetgreen traders, the primary query is whether or not the corporate can increase exterior its core coastal city markets into the suburbs earlier than its rivals change into a bigger risk to its market share. Morgan Stanley analyst John Glass additionally wrote in a be aware to shoppers that Sweetgreen’s unprofitability may very well be a priority for some traders, given that almost all of publicly traded eating places are worthwhile.

In 2021, Sweetgreen rebounded from pandemic lows, narrowing loses to $86.9 million from a lack of $100.2 million, as of Sept. 26. Similar-store gross sales have risen 21%, within the year-ago interval.

It is anticipated that 2022 will carry extra thrilling IPOs for the restaurant {industry}. P.F. Chang’s was reportedly in talks to go public, and Panera Bread mentioned in November that it is planning to return to the general public markets.

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