What happened?
Shares of mediterranean fast-casual restaurant chain CAVA (NYSE: CAVA) fell 10.1% in the morning session after the company reported its third-quarter 2026 financial results and updated its full-year financial outlook.
According to a company press release, CAVA reported third-quarter revenue of $356.4 million, up 22% year on year, while same-store sales rose 3.1% and net openings brought its footprint to 500 restaurants. The company projected full-year adjusted EBITDA of $184.0 million to $189.0 million, restaurant-level profit margins between 23.7% and 24.0%, and pre-opening costs of $28.5 million to $29.5 million. However, the results fell short of Wall Street's expectations. Revenue of $356.4 million missed analyst consensus estimates of $359 million, while third-quarter adjusted EBITDA of $42.33 million missed expectations of $44.11 million.
Furthermore, the company's full-year EBITDA guidance midpoint of $186.5 million lagged analyst estimates of $190.3 million. Investors also reacted to a deceleration in same-store sales growth to 3.1% and a contraction in operating margin to 4.2%, down from 5.9% in the prior-year period.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy CAVA? Access our full analysis report here, it’s free.
What is the market telling us
CAVA’s shares are extremely volatile and have had 31 moves greater than 5% over the last year. But moves this big are rare even for CAVA and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was about 20 hours ago when the stock gained 7.8% on the news that Mcdonald's profit beat and a smaller-than-expected u.s. sales decline lifted restaurant stocks, from fast food through sit-down dining.
The company earned $3.57 a share, excluding items, above the $3.38 estimate from analysts. These chains sell the same meal to the same budget-conscious diner. Global same-store sales rose 1.5%, and Chief Executive Chris Kempczinski said the U.S. business improved as the quarter went on with the company's push on value. Contributing to the optimism, Democratic midterm election victories helped reduce market unpredictability for investors, the Financial Times reported.
CAVA is down 9% since the beginning of the year, and at $55.02 per share, it is trading 43.5% below its 52-week high of $97.39 from April 2026. Investors who bought $1,000 worth of CAVA’s shares at the IPO in June 2023 would now be looking at an investment worth $1,259.
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