Why Sweetgreen Stock Plummeted by Nearly 15% This Week
Key Points
The cyclospora outbreak is linked to lettuce, a key ingredient in its restaurants.
The FDA continued to issue warnings about the situation.
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Mr. Market didn't have much of an appetite for Sweetgreen (NYSE: SG) stock over the past few days. The salad-focused healthy cuisine restaurant chain operator fell out of favor due to increasingly stern warnings about the current outbreak of the cyclospora parasite, which has been linked to lettuce.
No cases have been reported at any Sweetgreen restaurant, but since it's a salad purveyor, investors were spooked anyway. According to data compiled by S&P Global Market Intelligence, the company's stock tumbled by almost 15% over the course of the trading week.
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A widening outbreak
The federal government's Centers for Disease Control and Prevention (CDC) issued its first Health Alert Network advisory last week. Since then, healthcare authorities have issued several updates indicating that cyclospora is spreading.
Image source: Getty Images.
The latest came on Friday, with the Food and Drug Administration (FDA) announcing that the outbreak, thought to originate in central Mexico, appears to have caused illnesses in nine states -- Illinois, Indiana, Kansas, Kentucky, Michigan, Ohio, Oklahoma, Pennsylvania, and West Virginia.
All told, based on findings from the CDC, the parasite has affected 1,947 people. Of these, 98 hospitalizations have been reported, although there have been no fatalities.
Avoidance tactics
While we're still some distance from a major, nationwide food healthcare emergency, the spread of cyclospora has been rapid, and caution is more than warranted. Diners will surely avoid restaurants like Sweetgreen, which in turn is going to affect the company's results. I think this stock has further to fall, so I'd avoid investing in it personally.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Sweetgreen. The Motley Fool has a disclosure policy.
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