With numbers like these, who needs caffeine?
Dutch Bros (BROS) shares were percolating on Nov. 7 after the drive-through coffee chain beat Wall Street's third-quarter earnings forecast.
Related: Starbucks 2024 holiday menu: When it launches & what to order
The shares are up nearly 47% year-to-date and a java-jolting 74% from a year ago. And last we looked the stock was climbing fully a third to $46.44.
"We are incredibly excited about the strength of our brand, the love from our customers and our clear path forward," Chief Executive Christine Barone told analysts during the company's earnings call.
💰💸 Don’t miss the move: SIGN UP for TheStreet’s FREE Daily newsletter 💰💸
"As the industry continues to evolve, we expect that our customers will place an even larger emphasis on iced beverages, on personalization and on speed," she said.
What more do you want? A rubber ducky?
Well, if you had shown up on at a Dutch Bros location on Sept. 29 — alias National Coffee Day — you would have gotten one of those, too, which came free with every drink purchased.
Dutch Bros Inc
Dutch Bros CEO stresses innovation
Barone said the promotion drove both excitement and sales volume as the company looks for more ways to connect with its customers.
"We believe innovation plays a foundational role in Dutch Bros' growth story," Barone said. "We use innovation to build sales layers and deepen our competitive moat through category-defining products."
Related: Analysts revise Starbucks stock price target after preliminary results
Bear in mind that this company was started in 1992 when Dane and Travis Boersma, two brothers of Dutch descent, spent $12,050 on an espresso machine and a single pushcart in Grants Pass, Ore.
Dutch Bros began franchising in 1999 and opened its 50th drive-through five years later.
Dane Boersma died in 2009 from Lou Gehrig’s disease. In 2013, Travis Boersma was featured on the television show "Undercover Boss."
The company began trading on the New York Stock Exchange on Sept. 15, 2021. Dutch Bros opened 38 shops in the third quarter of 2024, bringing the total count to 950 across 18 states.
Barone said the company expected to open at least 160 shops in 2025.
"We are executing our real estate strategy and are very energized by the results," she said. "We believe the combination of enhanced market planning and our elevated paid-ad spending in new markets is driving improved new-shop productivity, which we saw once again in Q3."
The company posted profit of 11 cents a share, up from 7 cents a year earlier, while revenue surged 28% year-over-year to $338 million. Both figures beat Wall Street's forecasts.
Dutch Bros said it expected 2024 revenue between $1.255 billion and $1.26 billion, up from its previous range of $1.215 billion to $1.23 billion.
Same-store sales rose 2.7% year-over-year and transactions increased 0.8%.
Investment firms' analysts issued research notes after the quarterly results were reported. These included UBS's Dennis Geiger, who boosted the firm's price target on Dutch Bros to $44 from $39 and affirmed a buy rating on the shares.
The company's third-quarter results and positive commentary highlighted solid same-store-sales transaction trends, continued strength in margins, and increased 2024 guidance that beat expectations, the analyst said.
Fund manager likes Dutch Bros expansion story
Geiger said he was encouraged by Dutch Bros' accelerating transaction growth and progress against key initiatives.
TD Cowen analyst Andrew Charles raised the firm's price target on Dutch Bros to $53 from $47 while maintaining a buy rating on the shares.
More Retail Stocks:
- Starbucks makes a major move many coffee drinkers will love
- Amazon's big tech plans pay off for customers (and its pockets)
- Once nearly-bankrupt used car dealer hits new highs
The analyst said that he was pleased with the quarter's adjusted EBITDA beat, driven by same-store sales and aligned with the high end of investor expectations. Fourth-quarter same-store sales guidance exceeded investor expectations, he said.
Chris Versace, a Wall Street veteran who manages TheStreet Pro's portfolio, is a fan of the company, building a position in August when shares were below $30.
Given the big move, Versace decided to take some profit, parting ways with 470 shares at or near $49. Although he's locking in some gains, Dutch Bros shares will still account for roughly 3% of TheStreet Pro's portfolio after the trade.
"We are taking advantage of the massive move in BROS shares today following last night’s beat-and-raise quarter that is spurring a round of price-target increases and short covering," he said.
Versace cited the company's favorable same-store traffic trends and improving margins, which led management to lift its outlook for revenue and the bottom line for this year.
Related: Analysts pick 3 stocks that could rock after President Trump's win
He also mentioned coffee-chain kingpin Starbucks's (SBUX) recent troubles, including falling sales and suspended guidance for 2025, which saw short interest in Dutch Bros climb to over 12.5 million shares, according to NYSE data.
"While we continue to like the BROS expansion story, which is tracking for this year and should continue in the next few years, as investors, we have to take advantage of opportunities like these when they present themselves," he said.
"So even though we are lifting our BROS price target to $50 from $39, we are locking in big gains today, and as we do so, downgrading the shares to a Two from One," Versace added.
As the short squeeze subsides and the shares settle out, the veteran fund manager said, "We’ll discuss potential price levels where it may make sense to consider adding back some shares."
Related: Veteran fund manager sees world of pain coming for stocks
