GrooveVC Community Update on RAVE Restaurant Group

July 29, 2015 at 8:21 am Leave a comment

Rave Restaurant Group’s stock continues to swoon in line with the other small cap restaurant stocks in its peer group.  Across the board we have seen these stocks fall 20-25 percent from their recent highs, despite posting strong results and all indicators pointing to very strong growth in new stores and good year over year comps at existing locations.  Yesterday Rave’s Pie Five division announced another significant development deal for new locations in Branson and Springfield Missouri, Tucson, Arizona and Albuquerque, New Mexico.  Here is a link to the full press release (click here).

We continue to believe that fast casual pizza is going to be a big deal and eventually have a footprint very similar to the fast casual Tex-mex chains, which means there are many years of growth ahead for the players that execute well.  We also think that there is room for at least two or three chains to stake out a claim in this space and early indications are that Pie Five is going to be one of the big winners.  Short sellers have been targeting RAVE for a few months now and they appear to be having their way with the stock as the broader market forces have been working to their advantage.  While this broader market and sector weakness may allow for some near term downside,  we believe that patient investors who can buy shares when the shorts are pushing it lower (like this week) will benefit tremendously when the market storms pass.

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