What Happened:
Shares of casual salad chain Sweetgreen (NYSE:SG) fell 6.8% in the afternoon session after the major indices declined (Nasdaq down -2.6%, S&P 500 down -1.6%). Markets are likely bracing for increased volatility ahead of the Fed's policy decision in September (2024). The consensus expectation is for the Fed to cut rates by 25 basis points to 5.00% - 5.25% during the September 2024 meeting. This will be the first rate cut since the committee began raising rates to tackle inflation. Historically, September has been a challenging month for most assets. Notably, since the post-World War II era, major stock indices have consistently recorded significant losses in the month of September relative to other months.
Additional data to consider amidst the volatility include the labor market report to be released in the first week of September, and the CPI report the following week. Given the historical trends and upcoming Fed policy decision, investors may need to prepare for continued market uncertainty and potential downside risk in the weeks ahead.
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 quite volatile and over the last year have had 57 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the stock gained 44.6% on the news that the company reported first-quarter earnings results. Sweetgreen blew past analysts' revenue expectations this quarter as its same-store sales grew 5%, enabling it to raise its full-year revenue guidance. Its gross margin also outperformed Wall Street's estimates.
On the other hand, its EPS missed analysts' expectations, but the market cared more about its upbeat outlook. Overall, we think this was a good quarter that should please shareholders.
Sweetgreen is up 166% since the beginning of the year, but at $29.46 per share it is still trading 21.8% below its 52-week high of $37.65 from August 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 $595.35.
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