- Sweetgreen stock sailed up to a 13-month high on Friday.
- Salad chain is expanding its automated kitchen concept.
- Margins rose quickly in Q1, and management thinks this will continue all year.
- Revenue bested Wall Street's consensus by nearly $6 million.
Sweetgreen (SG) stock stole the show on Friday. In a week that saw poor earnings announcements from many other growth stocks, Sweetgreen’s success contrasted sharply coming off the past year’s downtrend.
The move in the broad market on Friday was a general rush to safe havens. The University of Michigan’s Consumer Sentiment Index displayed an extreme dropoff in the confidence of US consumers. Earlier this week heavier US unemployment claims surprised economists.
The Dow Jones’s surplus of blue chips managed to make gains, but the NASDAQ pulled slightly lower.
Sweetgreen earnings results
In the first quarter, Sweetgreen, a chain of salad-focused restaurants, garnered a 26% growth in revenue compared with the same quarter a year prior. It nearly reached $158 million, which bested Wall Street consensus by nearly $6 million.
The fast-casual chain still lost $0.23 in GAAP earnings per share (EPS), which missed consensus by a penny, but that news was overshadowed by a number of announcements.
Sweetgreen saw a 5% increase in same store sales, which is positive news since California recently legislated a major hike in worker wages at fast-food chains. More importantly, statistics at the restaurant level saw a major uptick, especially considering that Sweetgreen raised prices significantly.
“Restaurant-level margin for the first quarter was 18.1%, expanding over 400 basis points year-over-year, making this one of the highest first quarter restaurant level margin performances in the company's history,” said CEO Jonathan Neman. “Restaurant-level profit for the first quarter was $28.5 million, a nearly 70% increase from a year ago.”
Management also expressed guidance that restaurant-level margins would continue rising to settle in between 18.5% and 20% for the year. Digital sales accounted for 59% of total revenue in the quarter, and more than half of those digital sales arrived via Sweetgreen’s own channels.
The company’s much-ballyhooed Infinite Kitchen concept, which is an automated kitchen that prepares meals for customers via touchscreen, will continue with seven new locations and several other remodels of existing locations.
Sweetgreen is slated to open between 23 and 27 new locations in 2024. Lastly, the company has announced its intent to roll out a steak topping this year at the restaurant, as well as serving steak as an entree.
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
Sweetgreen stock forecast
Sweetgreen stock experienced varying levels of resistance in the $30 to $40 range between December 2021 and April 2022. This volume shelf means that Sweetgreen should consolidate in this range for a solid chunk of time before making an attempt at the $40 resistance level that pushed the share price back down toward the latter end of that time period.
Sweetgreen's pronounced weekly candlestick below tells the market that this optimism is likely here to stay. SG stock has largely been trading above the 13-week Exponential Moving Average (EMA) since the end of February. The Moving Average Convergence Divergence (MACD) strongly shows the rally gaining steam as well.
Sweetgreen will need to move toward profitability rather soon, however, in order to sustain this rally during a period of high interest rates.
SG weekly chart
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