Why Sweetgreen Stock Surged Today
Key Points
Sweetgreen's stock price was hit hard by the cyclospora scare.
It appears that another restaurant chain was the source of the outbreak.
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Shares of Sweetgreen (NYSE: SG) rallied on Friday after health officials identified the source of a worrisome illness that has spread rapidly across the U.S.
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A welcome relief
Prior to today, Sweetgreen's stock had lost about a quarter of its value due to concerns regarding the cyclospora parasite that has sickened thousands of people.
The intestinal illness can be spread via contaminated fresh produce. Investors worried that people would avoid Sweetgreen's restaurants for fear that its salads could be a source of the parasite.
Those fears were eased on Friday after the Centers for Disease Control and Prevention told people not to eat shredded iceberg lettuce from Taco Bell restaurants in five states.
The warning followed a Food and Drug Administration (FDA) investigation that reportedly traced the outbreak to one of Taco Bell's suppliers.
Not quite all clear yet
Although shareholders were able to breathe a sigh of relief today, it's important to remember that Sweetgreen was already facing challenges before the Cyclospora outbreak.
The fast-casual chain's same-store sales fell 12.8% in the first quarter, driven by an 11.2% decline in customer traffic. Higher energy costs have weighed on consumers' budgets, forcing many people to cut back on restaurant visits.
Investors can expect to receive an update on Sweetgreen's efforts to boost sales amid a difficult macroeconomic backdrop when it reports its second-quarter financial results on Aug. 6.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Sweetgreen and Yum! Brands. The Motley Fool has a disclosure policy.
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