Sweetgreen's Next Earnings Report on Aug. 6 Could Send the Stock Soaring. 3 Reasons Why.

Sweetgreen (NYSE:SG) has served up a sour bowl for investors over the last year and a half.

The stock is down 86% from its peak in late 2024, amid a wide range of challenges. Discretionary spending on fast-casual food slowed broadly in response to ongoing inflation and the “K-shaped economy.” The company changed its loyalty program, leaving members of the earlier Sweetpass membership program miffed, and it sold Spyce, the unit that owns the Infinite Kitchen, though it retained the rights to use it.

As a result, with comparable sales falling by double digits in the first quarter, investors seem to have given up on what was once one of the most promising growth stories in the restaurant industry.

However, Sweetgreen appears to be on the verge of a turnaround. Here are a few reasons the stock could soar on its second-quarter earnings report, due after hours on Thursday.

Image source: The Motley Fool.

1. Wraps are resonating

Sweetgreen launched wraps nationally in May, and the product seems to solve a number of problems for the company. First, it offers customers a cheaper option, helping to assuage concerns about a lack of value from its menu. Second, it matches competing handheld menu items from other fast-casual chains like Chipotle and Cava, offering an alternative to customers who don’t want a salad; third, it brings in customers interested in trying new menu items, keeping the menu fresh.

Anecdotally, the wraps seem to be receiving a favorable response, which is a good sign for both second-quarter results and the business’s long-term performance.

2. Same-store sales could turn positive

In addition to the impact of wraps, there are other reasons to suspect that Sweetgreen could report positive comps, or at least something close to it.

The company is lapping the quarter in which it replaced its loyalty program, which led to some customer defections, so it’s facing easy comparisons with the quarter a year ago. Data from Placer.ai, a location intelligence company, showed that overall foot traffic rose 22.7% from the quarter a year ago, though that includes the impact of new stores.

Additionally, Chipotle reported its fastest comparable sales growth rate in six quarters in the second quarter, posting 2.2% same-store sales growth, a trend that could bode well for other fast-casual operators like Sweetgreen.

Finally, the company guided to a same-store sales decline of 2%-4% for the full year, implying that comparable sales are expected to be roughly flat after a 12.8% decline in the first quarter, so Q2 could be positive if results are better than expected.

3. The stock looks oversold

After falling nearly 90%, the stock seems to be priced as if the business is headed for extinction. In addition to the sell-off, 22% of the float is short, which could trigger a short squeeze and send the stock soaring if it delivers a strong quarter.

On a price-to-sales basis, the stock trades at a ratio just above 1, which looks like a great price for a company with Sweegreen’s growth potential.

Though its comparable sales have fallen sharply, the company still has average restaurant sales of $2.5 million, not far behind Chipotle, and it’s opening new stores. Sweetgreen is unprofitable, but if it can return to comparable sales growth in the coming quarter, that could change. Over the next few years, the stock could move a lot higher from its current price if the business returns to health.

Jeremy Bowman has positions in Cava Group, Chipotle Mexican Grill, and Sweetgreen. The Motley Fool has positions in and recommends Cava Group and Chipotle Mexican Grill. The Motley Fool recommends Sweetgreen and recommends the following options: short September 2026 $35 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.