Dutch Bros (BROS) has been on a caffeine high. The drive-thru coffee chain has posted impressive revenue growth and rapidly added new locations, making it a stock to watch. In Q1, its revenue rose 39% to $275 million, driven by 10% comparable sales growth after a slow 2023. Adjusted EBITDA more than doubled. Dutch Bros had a 9.3% operating margin in Q1. The company reported $7 million in net income, up from the $4 million loss in the prior year’s quarter. Its 2024 revenue outlook was raised above $1.2 billion, signaling greater future performance. Currently trading at $38.38, the stock has an attractive valuation.

Who Is Dutch Bros?

Dutch Bros is a popular, rapidly growing chain concentrated in the West but expanding nationwide. The company operates 876 locations currently with plans for 4,000 in time. Since they’re only in 17 states, this gives them a lot of room for growth. While the café focuses on its espresso-based favorites, it also offers customers blended coffee drinks, smoothies, shakes, sparkling sodas, other beverages, and snacks. The company prioritizes customer engagement with its Dutch Rewards program, which brought in 66% of Q1 transactions. Key factors favoring Dutch Bros include its unique culture and brand loyalty, reaccelerating comparable sales, new leadership from an experienced CEO, and a clear national expansion opportunity. Its increase in sales is not all due to expansion. Same-shop sales growth in the first quarter of this year was 10%.

Why Release More Stock?

On Monday, Dutch Bros announced a registered underwritten public offering of its Class A common stock by certain selling stockholders affiliated with TSG Consumer Partners, L.P. The shareholders intend to offer 8,762,700 shares of Dutch Bros' Class A common stock. At the same time in a private transaction, they will distribute securities convertible into 723,813 shares to certain indirect members not partaking in the public offering. This secondary offering by shareholders is not intended to raise capital, although the company will pay most of the costs. The move will impact the company’s shareholder structure and voting rights but seems to have had minimal effect on the share price.

TD Cowen has revised its outlook on BROS stock from a Hold to a Buy rating, with a price target between $33 and $46. Overall, the consensus among a dozen analysts put Dutch Bros as a Strong Buy.

Neither Julie Stoller nor Stocks.News have positions in the companies mentioned.