What Happened?
Shares of casual salad chain Sweetgreen (NYSE: SG) fell 3.8% in the morning session after several Wall Street analysts lowered their price targets on the stock, contributing to its slide. The stock has experienced a significant downturn, declining 74% over the past 12 months. The recent pressure follows price target reductions from several financial institutions. For instance, Piper Sandler lowered its price target on Sweetgreen to $12.00 from $20.00, while Barclays cut its objective to $10.00 from $17.00. Morgan Stanley and UBS Group also reduced their price targets. This series of downward revisions from analysts reflects growing concerns on Wall Street about the company's valuation and near-term performance, despite the company reporting revenue growth of 5.74% over the last year.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Sweetgreen? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Sweetgreen’s shares are extremely volatile and have had 62 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was about 21 hours ago when the stock dropped 4.6% on the news that the major indices continued to pull back, with technology stocks accounting for most of the market's largest decliners. A key reason for this trend is that much of the recent market gains were concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.
Despite the downturn, some analysts viewed this as an opportunity to own some of the "Core AI winners." Dan Ives of Wedbush Securities commented, "In our view, the tech bull cycle will be well intact for at least another 2-3 years, given the trillions being spent on AI infrastructure/software/chips/power/apps looking ahead. This remains our tech playbook and investor roadmap." Additionally, mixed earnings reports from retailers, such as Target, have added to the market's weakness. Investors are closely monitoring these reports for insights into the broader economic health and the potential impact of new tariffs on inflation.
Sweetgreen is down 72.7% since the beginning of the year, and at $8.76 per share, it is trading 80.1% below its 52-week high of $43.97 from November 2024. Investors who bought $1,000 worth of Sweetgreen’s shares at the IPO in November 2021 would now be looking at an investment worth $176.87.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
