Bank of America thinks momentum is on Sweetgreen’s side, even as people return to the office at a slower-than-expected pace. Analyst Katherine Griffin upgraded Sweetgreen shares to buy from neutral, citing increasing foot traffic, sustained momentum in same-store sales growth and long-term plans to automate operations. “Sustained y/y visits growth suggests mobility continues to improve and SG [same-store sales growth] can maintain momentum, removing a key overhang on the stock,” Griffin wrote in a Thursday note. The growth in visits since March also suggests better store execution and guest experience from the depressed levels in 2022, she added. Griffin raised her price target to $17 from $9, implying shares will rally 30.3% from Wednesday’s close. Shares were up more than 5% Thursday during premarket trading. Sweetgreen’s recently-launched loyalty program has created potential for higher digital sales mix and frequency, according to the analyst. Griffin said Sweetgreen “can leverage its traffic-driving initiatives by growing digital engagement through its mobile app.” The company’s long-term plans to automate its kitchens could reduce labor intensity and help with margins, added the analyst. Sweetgreen opened its first fully automated kitchen in May and plans to open another one later in the year. “Based on our saturation analysis, we see potential for SG to achieve its 1,000 [long-term] store growth target. SG has high unit-level returns (40% in Yr-2) and store productivity (over $1,000/sq ft),” said Griffin. “We see upside to unit economics as SG continues to leverage investments in labor optimization technology (including automation).” The stock has surged more than 52% year to date, but has traded flat over a 12-month period. —CNBC’s Michael Bloom contributed to this report.
