Why Cava Stock Dropped 20% in December

Stock Performance - Cava Group's shares dropped 19 9% in December, similar to the decline of Sweetgreen, suggesting the drop was not directly related to the company [1] - Cava stock more than tripled in value during the first 11 months of 2024, leading to selling pressure in December as investors locked in gains [2] Insider Transactions - Significant insider selling occurred in December, with co-founder and CEO Brett Schulman selling around 300,000 shares and Chairman Ronald Shaich selling over three million shares [3][4] - Insider buying in December involved exercising stock options, which did not carry the same weight as the selling since shares were not acquired at market prices [5] Valuation Concerns - Cava stock's price-to-sales (P/S) valuation reached 15, more than double its valuation at IPO and significantly higher than the typical 1 to 2 times sales for restaurant stocks [7] - The high valuation and significant stock price increase made investors more sensitive to insider selling, as it appeared insiders were cashing out at the highs [6][8] Long-Term Growth - Despite the recent volatility, Cava still has substantial long-term growth opportunities, and future insider transactions should not deter investors from evaluating the company's potential [8]