Why Sweetgreen Stock Dived by 10% This Week

According to data compiled by S&P Global Market Intelligence, Sweetgreen (NYSE: SG) stock lost more than 10% of its value in trading this week. The salad and healthy food restaurant chain operator suffered from news of an analyst's price target cut.

A price target sliced like a cucumber

The cutter was Brian Harbour of influential white-shoe investment bank Morgan Stanley. On Tuesday, Harbour enacted a fairly assertive cut on his Sweetgreen fair value assessment, to $28 per share from his previous $32. In doing so, he maintained his equal weight (read: hold) recommendation on the shares.

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According to reports, the analyst's move wasn't necessarily due to any news coming from Sweetgreen. Rather, he's become less enthusiastic about the prospects for the U.S. restaurant industry as a whole, since he's expecting the sector's rebound to be sluggish -- in his estimation, it'll grow by less than 5% compared to 2024, compared to last year's 4% rise.

Caution seems to be in the air with the restaurateur's stock these days. It had a torrid 2024 on the exchange, more than tripling in value over the year. Investors were particularly excited about Sweetgreen's Infinite Kitchen model, centered around the automation of its salad-making.

Infinite hopes for the future

Sweetgreen is putting a lot of hope, and considerable company resources, into Infinite Kitchen. Like the share price in 2024, the number of its kitchens outfitted with the robot salad chefs rose exponentially -- and quickly, jumping from only two at the end of its second quarter to five at the conclusion of the following frame.

This is an exciting development worth watching, not least because it promises to save the company gobs of capital on labor costs. I wouldn't be so hesitant or pessimistic on its chances; to me, its stock looks like a very interesting speculative buy for investors with an above-average tolerance for risk.

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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.