Jonathan Neman, Nicholas Jammett and Nathaniel Roux, Sweetgreen at NYSE, November 18, 2021
In a hot year for restaurant IPOs, one latecomer could prove a more exciting year ahead, creating a new category and demonstrating the power of technology investment.
After a tough 2020, restaurant stocks fared better this year as vaccinations and the lifting of restrictions boosted investor confidence in the segment. Seized by this optimism, five restaurant companies, including Krispy Kreme and Dutch Bros, decided to go ahead with an initial public offering with mixed results.
Sweetgreen only debuted in mid-November and has yet to be able to report its quarterly earnings. The salad chain has priced its initial public offering at $ 28 per share. The stock soared 76% on its first day of trading but has since plunged 35% amid concerns over the omicron option. However, some are excited about the stock and its future.
“Sweetgreen is in the early stages of creating a new category in the restaurant industry, and this opportunity appears about once every ten years after the IPO. [Starbucks] in 1992 [Chipotle Mexican Grill] in 2006 and [Wingstop] in 2015, “Cowen analyst Andrew Charles wrote in a note to clients on December 13.
Sweetgreen is the first fast food salad chain to go public, but probably not the last. Lots of other competitors like Chop’t, Just Salad and Dig are waiting in the wings with millions of dollars in fundraising.
Charles also said the salad chain is a restaurant company that best integrates two industry trends: consumer-centric technology and transparent food sources.
Goldman Sachs analyst Jared Garber initiated the stock purchase with a target price of $ 48 per share, stating that the company is at the forefront of technological innovation and integration in the restaurant industry despite its small size. More than two-thirds of Sweetgreen’s sales are from digital transactions, and the company bought the robotics company Spyce earlier this year.
For Sweetgreen’s investors, the main question is whether the company will be able to expand beyond its main coastal urban markets into the suburbs before its competitors become a greater threat to its market share. Morgan Stanley analyst John Glass also wrote in a note to clients that Sweetgreen’s unprofitability may worry some investors, given that most public restaurants are profitable.
Sweetgreen bounced off pandemic lows in 2021, cutting losses to $ 86.9 million from a loss of $ 100.2 million as of September 26. Sales in the same stores were up 21% year-over-year.
The restaurant industry is expected to have more interesting IPOs in 2022. PF Chang’s is said to be in talks for a public offering, and in November, Panera Bread said it plans to return to the public markets.