Why This "Broken" Restaurant Stock Is My Top Rebound Play for 2026

If you've been investing in restaurants, you know the fast-casual sector has been a slaughterhouse lately. I've watched Cava Group (NYSE: CAVA) go from a market darling to a pariah. The stock skyrocketed over 300% between late 2023 and the fall of 2024, then crumbled in 2025.

Since hitting an all-time high in February 2025, shares have shed roughly 53% of their value through Jan. 6. Some might say something is broken. But after digging into what's going on with Cava, I'm convinced the business isn't broken and that the stock price is finally rational.

Here is why I think it's smart to buy the dip on Cava while the rest of the market is running for the exits.

Image source: Getty Images.

It's not just Cava's issue

Let's be clear: Cava's slide isn't happening in a vacuum. The entire dining sector is battling a pullback in consumer spending, particularly among Gen Z diners who have historically driven fast-casual traffic.

We can see the same cracks in Chipotle Mexican Grill. It makes sense that when the economy stalls, pricey lunch bowls are often a first luxury to go. The impact on Cava is visible in the headline numbers. In third-quarter 2025, same-restaurant sales growth cooled to just 1.9%.

Compare that to the blistering 18.1% growth posted in Q3 2024, and it's easy to see why momentum traders dumped the stock. The days of easy, double-digit comps are probably over for now.​

Why new stores are the X factor

However, headline comps mask the most important story for long-term investors looking to make a profit off of Cava: the incredible profitability of its new restaurants. While mature stores are seeing slower traffic growth, Cava's 2025 openings are performing exceptionally well. The company's newest locations are generating annualized average unit volumes (AUVs) north of $3 million. For context, that puts them in the upper echelon of the industry, rivaling heavyweights like Chick-fil-A.​

Even more impressive is its profitability. Despite inflationary pressure on ingredients, Cava maintained restaurant-level profit margins above 24% in the third quarter. This proves that its concept passes the tests of location and product pricing. Whether in the suburbs of Chicago or new markets in Florida, the "Mediterranean Chipotle" model appears to be working.

Cava's new product releases

Cava continues to test new products. For example, the September launch of chicken shawarma might be a long-term new traffic driver, giving regulars a reason to return and new customers an excuse to try the brand.

Not every test will be a winner, though -- the recent grilled salmon pilot received mixed feedback -- but that's beside the point. I like seeing this approach, as it reflects a management team willing to experiment, fail fast, and double down on what resonates with guests.

I think Chipotle has done a great job with this, which is why it keeps testing new protein options. Cava is following suit.

Cava also successfully launched The CAVA Shop in November, tapping into cult loyalty with merchandise like feta hats and hot harissa tees. It sounds trivial, but successful merchandise is a hallmark of a lifestyle brand (think Dunkin' or Taco Bell) that has staying power beyond just lunch.​

The Starbucks bearista cup is another example of this. It was a viral sensation after the limited-edition bear-shaped tumbler sold out instantly in late 2025. Its scarcity sparked long lines and high resale prices.

The path to 1,000 stores

The long-term thesis for Cava remains simple: There's plenty of room to grow. With just 415 locations today, Cava is still a toddler compared to Chipotle's 3,000+ footprint. The company has a credible, funded path to 1,000 restaurants by 2032. If it can hold margins steady while tripling store count over the next seven years, the current valuation of around $65 per share will look like a steal in retrospect.​

The market has punished Cava for being a mortal company in a slowing economy. But the underlying unit economics of its new stores suggest that the brand is stronger than ever.

I'm looking past the ugly one-year chart and focusing on the 10-year horizon. At these levels, Cava offers a rare combination of disciplined pricing power, massive expansion potential, and a brand that connects deeply with its customers. I see big rebound possibility this year.

Micah Zimmerman has no positions in the stocks mentioned. The Motley Fool has positions in and recommends Cava Group, Chipotle Mexican Grill, and Starbucks. The Motley Fool recommends the following options: short March 2026 $42.50 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.