Sweetgreen (NYSE:SG) is an up-and-coming quick service restaurant chain focused on healthy and primarily plant-based menu options. The chain has attracted significant attention from consumers looking for healthier alternatives to traditional fast food chains and may be in for several more years of mushrooming growth.
Is Sweetgreen stock worth buying today to hold for the next five years, or do investors still need to see more from the chain before adding it to their portfolios?
Sweetgreen’s Sales Slow
2024 saw Sweetgreen’s revenues rise 16% from 2023 to total $676.8 million. That growth rate, however, slowed significantly in the fourth quarter, which delivered only a 5% year-over-year revenue increase.
Same-store sales advanced 6% for the year and 4% for the final quarter. Q4 also saw a slowdown of restaurant-level profit margins to 17% compared to 20% for the year as a whole.
Another area in which Sweetgreen turned from a sprint to a jog last year was the number of restaurants it opened. 2024 saw net restaurant openings of 25 new locations, a significant reduction from the 35 the company opened in 2023.
On the net income front, Sweetgreen lost a total of $90.4 million last year. This gave it a net loss margin of 13%, which was a meaningful improvement from the 19% it lost in 2023. Net loss margin did, however, tick up again in Q4 to 18%.
Sweetgreen’s Growth Is On The Rise
Sweetgreen is still a relatively young company that could be in the early phases of its growth story. Management eventually hopes to have thousands of locations. Despite the slower opening rate in 2024, they are planning to get back on track by opening 40 new stores this year.
The hope is to make huge strides in margins via the Infinite Kitchen concept. This highly-automated kitchen plan will help the company both reduce its staffing requirements and make more efficient use of ingredients by reducing waste. Of the 40 stores that are planned to be open in 2025, half will feature the Infinite Kitchen.
Sweetgreen is also planning expansion into more suburban markets, a distinct contrast from the highly urban environments where its early stores saw great success. Moving out into suburbs could bring Sweetgreen closer to its customers while also expanding its base. With that said, there is some risk to the company in moving outside of the high-income, densely populated areas that have historically been quite friendly to its menu.
Overall, Sweetgreen has a proven restaurant concept that could translate well to a much larger base of stores over time. This, in turn, should drive higher revenues and help the company get closer to net profitability.
For 2025, Sweetgreen is targeting $760-780 million in revenues, an increase of around 13.7% from last year. EBITDA is also expected to increase from the $18.7 million delivered in 2024 to between $32 million and $38 million.
Is SG Overvalued?
On the surface, Sweetgreen doesn’t exactly look cheap for a company with slowing revenue growth that still isn’t turning a profit. SG shares currently trade at 4.4x sales and 6.9x book. Given the level of losses that Sweetgreen is still incurring, these multiples are a bit high for some more value-oriented investors.
That fact hasn’t diminished analyst bullishness on SG’s prospects. The average target price of $32.50 is still 23.6% above the most recent price of $26.29. Even the lowest standing price target of $26 would only see SG shares lose a marginal amount.
The stock also has six buy ratings and four hold ratings. Of the analysts covering Sweetgreen, none have issued sell ratings.
Institutional investors, however, appear to be taking a slightly less optimistic view of Sweetgreen’s prospects and value. The number of SG shares sold by institutions consistently outpaced the number bought throughout 2024, a trend that has remained in force in early 2025.
Over the last six months, institutional investors have sold off about $7.3 billion worth of SG and bought only about $4.6 billion. As such, there appears to be a significant disparity between analyst price projections and the moves of investment professionals.
What Will Spoil The Sweetgreen Salad?
Although Sweetgreen has substantial growth potential, the share price, a slowdown in consumer spending is likely to pressure revenue growth.
The company is already expecting same-store sales to only increase by 1-3% this year, a number that is likely to be further hit by consumers curtailing spending in response to inflation.
Sweetgreen also needs to contend with competitive pressures as ever more chains introduce healthy and plant-based options to cater to shifting consumer tastes.
While Sweetgreen’s menu of such items will almost certainly remain larger than its competitors, the lack of an established brand moat leaves it exposed to rivals from larger, more established chains with greater recognition among consumers.
Is Sweetgreen Stock Worth Holding For the Next 5 Years?
Even with slower same-store sales growth, Sweetgreen stock is worth holding over the next 5 years.
The fly in the ointment, so to speak, is the combination of the currently slowing top line and a somewhat elevated valuation.
Those who buy Sweetgreen today don’t appear to be getting any bargains, and the current financials makes it somewhat questionable whether it will be able to achieve its goals for 2025 if consumers start to pullback.
Ultimately, Sweetgreen may not be the best stock to own for the coming five-year period unless it can demonstrate renewed growth to its shareholders. The business itself is far from unappealing, but the price multiples are currently on the high side for a company that is still losing money and whose revenue growth has slowed.
The movement of institutional investors out of SG over the last year also presents some cause for concern because they signal that Sweetgreen has lost its luster among Wall Street’s smart money.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
