MCD vs. TXRH vs. CAVA: Which Restaurant Stock Has the Highest Upside Potential?

Business Insider

a day ago

Macro uncertainties and tariff-led pressure on costs are expected to continue to weigh on the performance of restaurant chains. While ongoing headwinds could impact restaurant stocks over the near term, analysts remain optimistic about the long-term growth prospects of several restaurant stocks. Using TipRanks' Stock Comparison Tool, we placed McDonald's (MCD), Texas Roadhouse (TXRH), and CAVA Group (CAVA) against each other to find the restaurant stock that has the highest upside potential, according to Wall Street.
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McDonald's (NYSE:MCD) Stock
McDonald's stock has risen about 15% over the past year, but is essentially flat on a year-to-date basis. The fast-food chain reported mixed results for the first quarter of 2025, largely due to a challenging macroeconomic backdrop.
In fact, U.S. same-store sales fell for the second straight quarter, posting the largest decline (down 3.6% in Q1 2025) since the onset of the COVID-19 pandemic. Unfavorable weather and cautious consumer spending impacted McDonald's sales in the first quarter.
Nonetheless, McDonald's reaffirmed its full-year guidance, reflecting resilience in a tough backdrop. The company stated that it is working on improving its performance by focusing on value meals, menu innovation, and product launches such as McCrispy Chicken Strips and the reintroduction of snack wraps.
Is McDonald's Stock a Buy, Sell, or Hold?
Last week, UBS analyst Dennis Geiger reiterated a Buy rating on McDonald's stock with a price target of $350. The 4-star analyst believes that the pullback in the stock, combined with encouraging U.S. sales in the second half of 2025, makes MCD an attractive pick. The analyst sees a 'reasonably limited' downside in MCD stock, as he believes that it is a quality business positioned for multi-year market share gains.
While Geiger agreed that consumer defensives are out of favor and quick service restaurant (QSR) sales trends and stocks continue to be under pressure, he expects to see share gains as U.S. and International trends improve. He added that McDonald's appears well-positioned to deliver strong same-store sales in the second half of 2025, driven by new products, value initiatives, and marketing plans, even as lower and middle-income spending pressure could persist.
Currently, Wall Street has a Moderate Buy consensus rating on McDonald's stock based on 12 Buys, 13 Holds, and one Sell recommendation. The average MCD stock price target of $329.42 indicates about 13% upside potential.
See more MCD analyst ratings
Texas Roadhouse (NASDAQ:TXRH) Stock
Texas Roadhouse is a casual dining steakhouse chain. The company missed analysts' earnings expectations for the first quarter of Fiscal 2025, as restaurant margins contracted due to commodity inflation and increased wages and other labor expenses.
TXRH's comparable restaurant sales increased by 3.5% in Q1 2025. The company indicated that trends were improving, with comparable restaurant sales rising 5% in the first five weeks of Q2 FY25. Additionally, Texas Roadhouse increased its menu prices by about 1.4% in early April.
Is TXRH a Good Stock to Buy?
Recently, Texas Roadhouse announced the departure of CFO Chris Monroe from the company and the appointment of Vice President of Finance Keith Humpich as the interim CFO. Reacting to the news, Stephens analyst Jim Salera stated that the interim CFO appointment adds stability following Monroe's departure, given Humpich's long tenure and familiarity with the company's financial operations.
Salera added that Texas Roadhouse continues to outperform casual dining rivals, with April traffic accelerating exiting Q1 2025. The analyst believes that the company's consistent execution, guest focus, and 'scratch-made' menu continue to be key differentiators in an uncertain consumer backdrop. However, Salera maintained a Hold rating on TXRH stock with a price target of $170, citing concerns related to macro uncertainty in the second half of 2025 and a premium valuation.
Overall, Texas Roadhouse stock scores a Moderate Buy consensus rating based on seven Buys and nine Holds. The average TXRH stock price target of $190.87 indicates a modest upside potential of about 2% from current levels. TXRH stock has risen 9% over the past year.
Cava Group (NYSE:CAVA) Stock
Mediterranean fast casual restaurant chain Cava Group delivered better-than-expected earnings for the first quarter of 2025, with revenue growing 28% to $332 million. The company's same-store sales increased by 10.8%, outperforming several peers in the industry. Despite the strong results, CAVA stock has declined 25% year-to-date and 9% over the past year owing to concerns over valuation and macro uncertainties.
Looking ahead, management aims to capitalize on ample opportunities to expand. The company expects to open 64 to 68 new restaurants this year, a slight increase from the previous forecast of 62 to 66 stores. Cava Group operated 382 restaurants as of the end of Q1 2025 and aims to increase its footprint to at least 1,000 restaurants by 2032.
Is CAVA Stock a Buy?
Recently, Stifel analyst Chris O'Cull reiterated a Buy rating on Cava Group stock but lowered the price target to $125 from $175. The 5-star analyst sees the pullback in the stock as a buying opportunity. Despite near-term challenges, the analyst believes that McDonald's long-term outlook is intact, supported by unit expansion, increasing brand awareness, and improving average unit volumes. He expects McDonald's long-term revenue growth in the 17% to 20% range, driven by a 15% unit growth and mid-single-digit same-restaurant sales (SRS) gains.
O'Cull acknowledged near-term softness in CAVA's SRS growth, particularly in the second quarter, due to tough comparisons with the prior-year quarter, which included the launch of the popular Grilled Steak. The analyst now expects Q2 SRS of 5.5%, below the Street's estimate of 6.9%. That said, he noted the strength in CAVA's fundamentals, calling the dip in the stock 'a dish worth grabbing.' O'Cull expects Cava Group's average unit volumes (AUVs) to grow faster than previously expected, fueled by brand expansion and improved performance at new locations. He expects the company's EBIT margin to improve to the range of 9% to 10% by 2030 from an estimated 4.8% in Fiscal 2025, driven by scale efficiencies.
CAVA stock price target of $112.92 indicates 34% upside potential.
Conclusion
Currently, Wall Street is cautiously optimistic about all three restaurant stocks discussed above. Currently, they see higher upside potential in CAVA stock than in MCD and TXRH stocks. Analysts view the pullback in CAVA stock as an attractive buying opportunity to build a position and gain from the company's long-term growth potential.