Sweetgreen Inc (NYSE:SG) stock price picked up after TD Cowen analyst Andrew Charles upgraded it from Hold to Buy and raised its price target from $31 to $43.

Charles vouched for Sweetgreen's long-term business given the intrinsic combination of transparent food sourcing and guest-facing technology, the two structural mega themes of the restaurant industry. The analyst is encouraged by execution that has improved 2024 traffic, likely sustaining in 2025.

In the longer term, Sweetgreen's story is distinguished by Infinite Kitchen's robotic kitchen equipment, which increasingly demonstrates accretion to cash and cash returns, Charles flagged.

He expects Infinite Kitchens to contribute meaningfully to margin expansion in 2025, which could lead to a 70%+ increase in 2030 adjusted EBITDA. He also argued Infinite Kitchen's ability to expand the TAM given lower pricing from superior margins.

Sweetgreen's same-store sales strength is enduring. Charles' 2025 bridge suggests that 5% is achievable relative to a 3.8% Consensus Metrix based on numerous tangible sales drivers in place.

Significantly, Charles noted 2024's sales strength continuing into 2025 from several tangible sales drivers, like ~4 months of the mix benefit from the May 2024 steak launch, a new store sales maturation tailwind, a normalized year of ~150 bps pricing, opportunities for menu innovation including handhelds, desserts, snacks, beverages, and a relaunched loyalty program in the first quarter of 2025.

The analyst also expects contributions from other less tangible sales drivers, including speed of service enhancements, marketing, advertising, and a consumer shift to a wellness tailwind.

Charles' bridge also includes a 250-300 bps headwind from macro deterioration to embed contingency in his estimate and presents a source of upside should the macroeconomic environment remain steady.

More differentiated, the analyst flagged his analysis on Sweetgreen's robotic assembly line, Infinite Kitchens (IK), which indicates it is soon reaching an inflection point that will materially impact restaurant-level margins starting in 2025.

Charles forecasted an incremental 70-140 bps annual margin expansion per year in 2025-29.

In the longer term, the analyst noted room for upside versus the 1,000 U.S. store stated total addressable market, given IK's superior unit economics, which can be reinvested into lowered price points to enter markets previously deemed unfit for the brand.

Charles projects third-quarter revenue of $173.2 million and adjusted EPS loss of 8 cents.

Price Action: SG stock is up 2.66% at $30.05 at the last check on Wednesday.

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