Even With SpaceX Down 50% From Its High, I'd Still Rather Buy This Unstoppable Growth Stock Before the End of August
Key Points
A 50% drop doesn't automatically make a stock a bargain.
Sometimes the better buy is the business with stronger fundamentals.
Space Exploration Technologies (NASDAQ: SPCX) has now fallen roughly 50% from its high, sinking to an all-time low. Bargain hunters are circling, and I understand the temptation. But with money to put to work this August, I would rather own a growth story I have far more conviction in: Cava Group (NYSE: CAVA).
SpaceX's slide is worth a quick look. The stock popped after its June debut, then unwound as the initial hype faded, and it now trades below its offering price at a record low. The timing adds pressure: SpaceX reports its first quarterly results as a public company on Aug. 4, and a large batch of previously restricted shares is set to unlock on Aug. 6, flooding the market with new supply just as sentiment is shaky.
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The business is not broken, but the stock still carries an enormous valuation resting on Starship and orbital ambitions that are years from proving out. That is too much uncertainty for my money right now.
Image source: Getty Images.
Why I'd rather buy Cava
Cava runs a fast-growing chain of Mediterranean restaurants, and its momentum has been remarkable. Sales at established locations have been climbing at a healthy clip, driven more by more customers walking through the doors than by higher prices, which is the healthiest kind of growth a restaurant can post. Even better is the runway ahead. Cava is opening dozens of new restaurants a year, recently raised its opening target, and is marching toward a goal of 1,000 locations by the end of the decade.
Crucially, it is doing all this profitably, so each new restaurant tends to strengthen the company rather than drain it. With its own quarterly report due later in August, there is a near-term catalyst too. To me, a beloved, profitable brand with a long, self-funding growth path is a far more dependable place to compound money than a space stock betting on technology that keeps slipping.
The risk worth naming
Cava is not cheap, and it's faced some recent volatility. After a strong run, a lot of its future growth is already reflected in the stock, so any slowdown in traffic or a stumble in new-store openings could hit shares hard. A weaker consumer could also pressure restaurant spending. This is a growth stock, with the volatility that label implies.
SpaceX, down 50%, will tempt plenty of investors, and it might reward the patient. But it remains a pricey, unproven wager with a share-unlock overhang. Cava is a proven, profitable, rapidly expanding brand with years of growth ahead. For August, I would rather buy the restaurant chain quietly filling its dining rooms than gamble on the beaten-down rocket stock. Just size it as the growth stock it is.
Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cava Group. The Motley Fool has a disclosure policy.