Is Sweetgreen Stock A Buy After Its IPO Surge?

Healthy salad chain Sweetgreen made its public debut this week and shares are already up over 75% — is it a good investment opportunity?

Nov. 19, 2021

Sweetgreen (NYSE: SG) has finally completed its initial public offering (IPO), and investors have been quick to get in on the action.

The company’s last private funding round gave it a $1.8 billion valuation after it raised $156 million from Durable Capital Partners. In just a couple of days, the salad maker’s total market capitalization has now reached over $5 billion, capitalizing on the growing interest in emerging industries like the healthy food sector.

What is Sweetgreen? 

Sweetgreen is a fast-casual restaurant chain that specializes in serving healthy salads. Based in the U.S., the firm was founded in 2007 to offer consumers a healthier alternative to fried fast food. Fast-forward to now and Sweetgreen has 140 stores in 13 states. 

When did Sweetgreen go public?

Sweetgreen went public on November 18, 2021. It is listed on the New York Stock Exchange under the ticker ‘SG’. It initially priced its IPO at $28 per share, but Sweetgreen stock is now trading at over $45 per share, just 24 hours later. Sweetgreen raised a total of $364 million through the sale of 13 million shares.

Sweetgreen’s financials 

According to an interview in 2018, the company had reached profitability, but apparently, that wasn’t completely true. Sweetgreen told The New York Times that it recorded revenue of $300 million in 2019, but this number was actually inaccurate too, the real figure was $274 million.

The company was hit hard when COVID-19 struck, and during the health emergency, Sweetgreen received $10 million from the Paycheck Protection Program to help its “dramatically affected” revenues and allow it to rehire its furloughed workers. 

On a positive note, the company has since rebounded, bringing in $243 million in revenue in the 3 quarters leading up to September 30, 2021. 

Sweetgreen’s growth potential 

In the words of co-founder and CEO Jonathan Neman:

“We like to say we want to build the McDonald’s of our generation,”

At the end of 2020, things started to improve for Sweetgreen. At this time, the Washington-based company announced its plans to open a new drive-thru prototype in Colorado by winter to capitalize on the stay-at-home workforce who couldn’t dine indoors. The drive-thru will offer a digital-order pickup, while the drive-in will entail a concierge service for in-car dining. Sweetgreen is also moving into suburban areas after mainly focusing on urban zones.

These innovative ideas prove just how strong the company is able to bounce back in struggling times. 

Just like its competitor Chipotle Mexican Grill, Sweetgreen benefited from using technology to boost sales even prior to the pandemic. Sweetgreen built a mobile app and ensured that its restaurants made picking up orders as easy as possible. Before the pandemic, around 50% of sales were digital but that increased by nearly 100% last September, whilst delivery sales grew by 75%.

Sweetgreen looks like it might have a bright future after the company has made moves to bolster its brand recognition by partnering with tennis grand slam champion Naomi Osaka. It also introduced a new brand image to “reimagine fast food and speak to future generations about the importance of what they eat.” 

Some experts believe that Sweetgreen has the potential to do well with the millennial and Gen-Z generations who are becoming more health-conscious. As the company aims to be a “positive force on the food system” by focusing on healthy food and sustainability, this might just be the healthy food stock for investors to watch.

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