Sweetgreen Inc. shares jumped 15% Thursday, the largest one-day gain in more than a year, after Bank of America Corp. upgraded the stock to buy from neutral and raised its price target to $17 from $9, signaling confidence in the salad chain’s growth as workers return to the office.
Increased foot traffic at Sweetgreen signals that the chain can sustain same store sales growth, analyst Katherine Griffin wrote in a note, citing data from Placer.ai. That removes a key overhang from the stock, as investors worried Sweetgreen’s large urban footprint would weigh on sales if return to office efforts stalled, she said.
Sweetgreen has multiple initiatives in the works to maintain traffic — including new menu items and the April launch of its loyalty program, Sweetpass — according to the note. In addition, Sweetgreen’s long-term plans to invest in automation to slim labor costs will help it compete against other fast-casual chains.
“We see significant opportunity for the company to narrow its margin gap to segment leader Chipotle,” Griffin wrote.
Bank of America’s bullish upgrade is a vote of confidence for Sweetgreen amid generally mixed views from Wall Street. The chain has five buy ratings, not including Bank of America, four hold ratings and one sell, according to data compiled by Bloomberg. The average analyst price target on the stock is about $12, while shares closed at about $15 Thursday, extending 2023 gains to 76%.
--With assistance from Katrina Lewis.
(Updates share moves at market close)
