Jonathan Neman, Nicolas Jammet and Nathaniel Ru, Sweetgreen on NYSE, November 18, 2021
In a year with a spate of restaurant IPO stocks, Sweetgreen – one of the late arrivals – could have an exciting year ahead of him as he is building a new category because of his tech investments.
After a tough 2020, restaurant stocks outperformed the following year as vaccinations and relaxed restrictions added investor confidence in the industry.
Swept away by that optimism, five restaurant companies, including Krispy Kreme and Dutch Bros, had their initial public offerings with mixed results.
The Sweetgreen salad chain only made its debut in mid-November and has not yet released any quarterly results. It went public at $ 28 per share – up 76% on its first day of trading – but has since fallen on fears about the Covid-Omicron variant. It traded at around $ 32 per share on Friday afternoon.
But some watchers see a lot of upside potential for the stock in 2022.
“Sweetgreen is in the early stages of creating a new category in the restaurant industry, an opportunity that comes roughly every 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 customer note.
Additionally, Sweetgreen has two key ingredients for the future: consumer-centric technology and transparent food sourcing, said Charles.
Sweetgreen is the first fast-casual lettuce chain to go public, but it probably won’t be the last. A flurry of rivals like Chop’t, Just Salad and Dig is waiting in the wings with millions of dollars in fundraising.
Goldman Sachs analyst Jared Garber initiated the stock as a buy with a target price of $ 48 per share and said that despite its small size, the company is at the forefront of technology innovation and integration in the restaurant industry. More than two-thirds of Sweetgreen’s sales come from digital transactions, and the company bought robotics company Spyce in early 2021.
For Sweetgreen investors, the main question is whether it can expand beyond its core markets into the suburbs before its competitors become a bigger threat to its market share.
Morgan Stanley analyst John Glass also wrote in a note to his clients that Sweetgreen’s unprofitability may be a concern for some investors, given that most publicly traded restaurants are profitable.
In 2021, Sweetgreen bounced back from pandemic lows, reducing losses from $ 100.2 million the previous year to $ 86.9 million on September 26. Sales in the same store increased by 21% during this period.
Next year is expected to see more IPOs in the restaurant industry, with PF Chang reportedly in talks about the IPO and Panera Bread announcing in November that it will return to the public markets.