Is Dutch Bros Stock a Buy?

By Kirsteen Mackay

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Dutch Bros stock continues to climb despite some headwinds. Is BROS stock a good long term investment?

Friendly coffee chain Dutch Bros (NYSE: BROS) is trending today as its share price continues its recent ascent. BROS stock is up 25% in the past five days including a 4% rise today.

What is Dutch Bros?

Dutch Bros. Coffee is a publicly held drive-through coffee chain in the United States. It is headquartered in Grants Pass, Oregon, with company-owned and franchise locations expanding throughout the western United States.

The company started in 1992 when Dane and Travis Boersma setup their pushcart by the railroad tracks in downtown Grants Pass, Oregon. They served espresso while enjoying their favourite tunes and made the time to connect with their local community. From there, its expansion story has grown exponentially to a presence covering 12 states.

Keeping its customers in mind and relationships at the heart of its ethos, Dutch Bros has adopted a fun and colourful image. 

We may sell coffee, but we’re in the relationship business. Whether we’re slinging drinks or serving up smiles, Dutch Bros is all about you! 

With drinks crafted with creativity in mind, their coffees are served hot, iced or blended. From the Iced Orange Groove Cold Brew and Blended Daydream Rebel to oat milk offerings such as the Iced Double Torture or the Iced Annihilator.

Why Dutch BROS stock is climbing

Dutch Bros released impressive Q4 earnings in early March. Its revenue rose 56% in the period beating analyst expectations.

Indeed, a couple of weeks ago the analyst Andrew Charles at Cowen, gave BROS stock a $65 share price target along with an Outperform rating. Today it’s inching closer to that mark sitting at $59.63.

Investing in Dutch BROS stock

Last year Dutch Bros increased its number of stores by 98 to hit 538 and its ambitious plans extend to reaching 4,000 stores over the next 10 to 15 years. 

For now, this means Dutch Bros costs are set to climb as the company changes the way it extends its 4,000-store footprint. Although these costs will hit hard initially, the hope is that over time the company will make bigger cost savings and thus improve margins along the way. It seems this is the logic driving the recent share price hike and keeping investors interested.

However, inflation is the buzzkill affecting all retail companies just now, as input costs soar and margins are squeezed. Therefore, Dutch Bros stock price could be hit from this angle too.

Nevertheless, for the patient investor Dutch Bros may well prove to be a lucrative long-term buy. It’s among the largest coffee chains in the US  after Starbucks, Dunkin Donuts and Tim Hortons so if it can take some of their market share it stands a chance at success.

If you are interested in small-cap stocks why not read our IPO coverage.

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Topics:
Coffee
Industries:
Consumer Discretionary
Companies:
Dutch Bros. Coffee

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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