Where Will Dutch Bros Stock Be in 3 Years?
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Dutch Bros (NYSE: BROS) has gone through some wild swings since its IPO in September 2021. The American drive-thru coffee chain went public at $23 a share, then more than doubled to a record high of $76.25 two months later, but now trades at about $35.
The bulls initially embraced Dutch Bros because it was growing rapidly and seemed destined to disrupt Starbucks. However, they retreated as the company's growth cooled off and rising rates compressed their valuations. Could it heat up again over the next three years as the macro environment improves?
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What happened to Dutch Bros. over the past three years?
Dutch Bros opened its first drive-thru store in 1994, and it expanded rapidly after it started franchising its new locations in 1999. Before going public, it had already expanded its retail presence from 254 shops in seven states at the end of 2015 to 471 shops in 11 states at the end of June 2021.
It then nearly doubled that brick-and-mortar footprint to 912 shops, including 600 company-operated stores and 312 franchised locations, by the end of June 2024. Its company-operated stores generated 91% of its revenue in the first half of 2024.
Over the past three and a half years, Dutch Bros consistently grew its same-store sales (at locations open for more than 15 months), opened new shops, and generated high double-digit revenue growth. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins also improved as it stayed profitable on a generally accepted accounting principles (GAAP) basis over the past one-and-a-half years.
| Metric | 2021 | 2022 | 2023 | 1H 2024 |
|---|---|---|---|---|
| Total Revenue Growth (YOY) | 52.1% | 48.4% | 30.7% | 34.2% |
| Same-Store Sales Growth (YOY) | 8.4% | 1% | 2.8% | 6.8% |
| Total Store Count Growth (YOY) | 22% | 24.7% | 23.8% | 21% |
| Adjusted EBITDA Margin | 16.5% | 12.3% | 16.6% | 19.6% |
| Net Profit Margin (GAAP) | (24.3%) | (2.6%) | 1% | 6.4% |
Data source: Dutch Bros. YOY = Year-over-year.
Dutch Bros' robust growth was driven by its "fortressing strategy" of flooding regions with new stores. That strategy builds its brand awareness and market share without relying on expensive marketing campaigns. It also raised its prices over the past two years to offset the inflationary pressure on its margins.
What will happen to Dutch Bros over the next three years?
For 2024, Dutch Bros expects to open at least 150 new shops, for its same-store sales to grow by the "low single digits," and for its total revenue to rise 26% to 27%. It expects its adjusted EBITDA to increase 25% to 31%, with a midpoint full-year margin of 16.8%.