Down More Than 30%: RBC Says It’s Time to Pull the Trigger on These 2 Beaten-Down Restaurant Stocks

Restaurant sales have been trending upward over the last two years, reaching $99.5 billion this past August – a 6.5% year-over-year gain. That steady rise has persisted even as signs of weakness emerge in the broader labor market, indicating that consumers are still willing to dine out despite economic headwinds. This resilience suggests that demand remains strong, and that the sector’s primary challenge lies not in attracting customers but in addressing ongoing labor shortages.

For investors, however, the broad industry momentum hasn’t translated into a reliable signal for restaurant stocks. Performance across the sector remains uneven, with some posting notable gains while others continue to lag. This divergence underscores how much individual business dynamics – and at times, sheer timing – can influence stock performance.

Given that, the current state of the restaurant sector suggests that there are going to be plenty of hidden gems there – stocks with beaten-down share prices and sound prospects for growth.

Against this backdrop, RBC analyst Logan Reich is looking at two such names that are down more than 30% and says it’s time for investors to pull the trigger.

According to data from the TipRanks platform, both of these RBC picks carry ‘Buy’ ratings and double-digit upside potential for the year ahead. Let’s take a closer look to see what RBC finds appealing about these names, and why they might be compelling choices for investors hunting for bargain-priced restaurant stocks.

CAVA Group (CAVA)

CAVA Group, the first RBC pick we’ll look at here, is a fast-casual chain based in Washington, DC, that offers diners a menu of Mediterranean fare. The company competes in both the limited-service restaurant sector and the health and wellness eatery niche, and boasts that its food has a broad appeal that is fueling sound growth.

That growth can be measured in the company’s expansion. In 2018, Cava purchased the competing Zoe’s Kitchen restaurant chain, and by 2023 had converted all Zoe’s locations to Cava restaurants. As of July 13 this year, the end of Cava’s fiscal 2Q25, the company had 398 restaurants in operation, a total that represented a year-over-year increase of nearly 17%. Since the second quarter ended, Cava has announced new restaurant openings in Canton, Michigan, as well as in Pittsburgh, Detroit, and Miami. The Canton location was the first in that state; the other three locations were the first in those cities.

Also in the fiscal Q2 report, Cava reported revenue of $280.6 million, and an EPS of 16 cents. The company’s topline total was up 20% year-over-year yet missed the forecast by $4.8 million; the EPS figure was down 1 cent year-over-year, but was 2 cents per share better than had been anticipated. Of more concern to investors, Cava reported a sharp slowdown in its year-over-year same-store sales growth. This figure came in at just 2.1% for fiscal Q2, compared to the 14.4% figure in fiscal 2Q24. Growth for the company’s same-store sales has been sliding for months – the metric was reported as 21.2% in the final quarter of fiscal year 2024, and was 10.8% in fiscal 1Q25.

The slowdown has been worrying investors all year, and the miss in revenue for 2Q25 underlined those worries. We should note here that shares in CAVA are down approximately 42% for the year-to-date.

RBC analyst Logan Reich covers this restaurant stock, and he believes that the slowing growth will likely turn out to be a blip rather than a prolonged trend. Noting that Cava inhabits a popular niche and holds a strong position within it, Reich says of the stock, “We view CAVA as the dominant brand in the fast-growing Mediterranean category with a long runway for unit growth. And with shares down 45% YTD we think this presents an opportunity given improving unit economics, which we think prompted Q2’s unit growth guide up, despite SSS deceleration. While NT SSS growth may continue to be volatile given ongoing consumer spending dynamics where the broader fast casual space experienced challenging traffic trends in Q2, we think that’s well-appreciated by investors. Over the next few years we think CAVA can comp in the MSDs driven by outsized category growth relative to restaurants more broadly, operational improvements, marketing, and menu innovation…”

The analyst quantifies his stance with an Outperform (i.e., Buy) rating on these shares, and he complements that with an $80 price target that suggests a one-year upside potential of 23%. (To watch Reich’s track record, click here)

Overall, CAVA stock has a Moderate Buy consensus rating on the Street, based on 18 recent analyst reviews that include 12 Buys and 6 Holds. The shares are priced at $63.16, and their $91.24 average target price implies a gain of 44% in the year ahead. (See CAVA stock forecast)

Wingstop (WING)

Next up on our list is Wingstop, the fast-casual chicken wings specialist. Wings are a popular dish, and Wingstop has built on that since its 1994 founding in Texas. Today, the company boasts over 2,800 restaurant locations worldwide, including more than 2,350 locations in the US and another 400-plus globally. The company operates in 11 markets around the world and opened 349 new locations during calendar year 2024. Wingstop claims to have 21 consecutive years of same-store growth.

All of this simply underscores the success of Wingstop’s guiding mission and vision. The company aims to bring the world bold flavors while becoming a Top 10 global restaurant brand. Supporting this, Wingstop has put together a menu that is simple but classic: a line-up of classic and boneless chicken wings cooked in 12 bold and distinctive flavors and accompanied by a chicken sandwich. The company offers customers periodic ‘drops,’ promotional items such as Buy-One-Get-One (BOGO) designed to draw people in – and customers can follow those drops on social media. Wingstop also works to create new flavors, the most recent being a smoky chipotle rub that was ‘dropped’ in time for the start of football season.

One of the strongest headwinds affecting the fast-casual dining sector is order throughput – that is, the speed with which customer orders are filled. Slow throughput leads to several immediate negative consequences, including unhappy customers and fewer orders in the long term. Wingstop is addressing this issue with its Smart Kitchen technology, being rolled out on a large scale this year. The tech uses AI, touchscreen order interfaces around the stores, and order readiness indicators to speed up the process of anticipating and delivering orders. In August of this year, Wingstop had the system operational in some 400 restaurants and aims to have it system-wide by year’s end.

When we look at Wingstop’s financial results, we find that the company’s fiscal 2Q25, the last reported, had revenues of $174.3 million, up 12% year-over-year and nearly $820,000 better than the forecast. Wingstop’s bottom line in the quarter, reported as a non-GAAP EPS of $1.00, was 13 cents per share better than the estimates had predicted.

We should note, however, that the shares have lost ~12% in 2025 and are down 35% from their most recent peak in June, with concerns revolving around valuation and decelerating growth.

But for RBC’s Reich, the pullback presents an opportunity. The analyst notes that the company has a record of strong growth, has built a reputation that stands out in a crowded niche, and shows every prospect of continuing to expand. He writes of Wingstop, “We view WING as a strong competitor in the growing chicken market which has a well-defined niche in wings which differentiates it from competitors. And with shares down 34% since Q2 earnings we think this presents an opportunity where franchisee ROIC of ~70% is best-in-class, likely contributing to the unit growth guide up in Q2. While SSS growth has decelerated materially from the high-teens growth in ’23/’24, we think this is well-appreciated by investors, and we see opportunities for reacceleration into ’26 from upcoming loyalty launch which should benefit from WING’s deep 1p data on ~60m consumers, improving delivery times, and further marketing opportunities.”

These comments back up Reich’s Outperform (i.e., Buy) rating on WING shares, while his $315 price target implies that the stock will gain 26% in the next 12 months.

Wingstop’s Strong Buy consensus rating comes from 21 recent reviews that include 17 to Buy and 4 to Hold. The stock’s trading price of $249.75 and average target price of $388.65 together suggest an upside of 56% by this time next year. (See WING stock forecast.)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.