Sweetgreen Shares Face Mounting Pressure as Q2 2025 Results Disappoint

The outlook for Sweetgreen has turned decidedly grim following the release of second-quarter 2025 financial results that exposed significant operational challenges. Market experts have responded with a wave of downgrades and sharply reduced price targets, while short interest in the company surges. Investors are now questioning whether a recovery is possible or if further declines lie ahead.

The disappointing performance triggered immediate reaction from financial institutions. Barclays slashed its price target by 20%, moving from $10 to $8 per share. This announcement alone precipitated a 5.3% stock decline two days prior to the official earnings release.

Even more severe was the assessment from BofA Securities, which downgraded Sweetgreen from a "Buy" to "Neutral" rating. The bank dramatically reduced its valuation expectation, cutting the price target in half from $18 to just $9.50. The consensus among research analysts is clear: faith in the company's growth narrative is deteriorating rapidly.

Operational Metrics Paint Bleak Picture

Sweetgreen's fundamental business performance revealed substantial weakness during the quarter. Comparable restaurant sales plummeted 7.6%, driven primarily by a staggering 10.1% decrease in customer traffic. Even menu price increases averaging 2.5% failed to offset this dramatic drop in visitor numbers.

Should investors sell immediately? Or is it worth buying Sweetgreen?

Total revenue saw only minimal growth, inching up 0.5% to $185.6 million. This meager increase was entirely attributable to new restaurant openings, masking the severe deterioration in established locations. The profitability picture proved equally concerning, with restaurant-level margins remaining thin at 18.9%.

Mounting Losses and Bearish Bets

The company's bottom line showed significant deterioration. Sweetgreen's net loss expanded substantially from $14.5 million in the prior year period to $23.2 million. The operating margin sank to negative 14.2%, indicating the business is burning cash at an accelerating rate.

Market skepticism is reflected in short interest data, which has reached concerning levels. With 24.33 million shares sold short, bearish positions now account for 23.69% of the company's free float. This represents a 6.29% increase in short interest over just one month. The days-to-cover ratio of 4.1 indicates substantial capital is actively betting on further price declines. While a short squeeze could theoretically provide temporary relief, the current fundamental backdrop makes such a scenario appear unlikely.

All Eyes on November Guidance

Attention now turns to Sweetgreen's early November earnings report, scheduled for November 6. The investment community awaits clarity on management's strategy to reverse the negative trends. Shareholders will be looking for a credible turnaround plan that addresses the core operational issues. Without convincing answers regarding performance improvement, the company risks facing another significant sell-off.