Why Shares of Sweetgreen Stock Sank 25.3% This Week
Key Points
Sweetgreen saw a temporary boost in May before coming back to earth.
Management has an innovative new menu strategy, but the business is still struggling.
With Sweetgreen never generating a profit, its stock is a tough buy candidate after this dip.
Shares of Sweetgreen (NYSE: SG) sank 25.1% last week, according to data from S&P Global Market Intelligence. A restaurant chain focused on salads and healthy bowls, Sweetgreen has struggled with customer traffic in recent years. The stock was up last month, but that has proven short-lived, and it is now falling back to earth this week.
Here's why Sweetgreen stock is sinking, and whether you should consider adding it to your portfolio.
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Analyst downgrade and short-lived bump in May
Before talking about Sweetgreen's fall this week, we need to dive into why the stock was rising in May in the first place. Sweetgreen released a new menu item -- wraps -- which went semi-viral in hopes of luring customers back to its stores. While the jury is still out on whether the wraps will work as a new menu item, Wall Street decided to kill the rally.
UBS downgraded Sweetgreen stock from "buy" to "neutral" this week, citing concerns around customer traffic figures and weak margins. Sweetgreen is currently posting same-store sales growth of negative 12.8% and had a $34 million operating loss last quarter.
Image source: Getty Images.
Should you buy the dip?
Sweetgreen is in the midst of a turnaround strategy for the health-focused restaurant brand. Its figures look terrible at the moment, and it has failed to generate a profit since going public in 2021.
With this context, it is hard to find a reason to buy the dip on Sweetgreen. Avoid adding this stock to your portfolio.
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool recommends Sweetgreen. The Motley Fool has a disclosure policy.