The Coffee Chain That Turned ADHD into a Business Model Just Won Wall Street (Shares Soar 35%)

So, Dutch Bros is having a moment. And by "moment," I mean shares are frothing up like a poorly-made cappuccino, up 35% last week. The reason? Dutch Bros has managed to surprise absolutely everyone (well, except their sugar-addled loyal customers who've been making Rainbow Rebels their entire personality) with an impressive Q3 that beat both top and bottom line estimates.

(Source: X) 

What’s more, is that for the first time in its hyper-caffeinated history, Dutch Bros generated positive free cash flow through the first three quarters of 2024. Translation: They earned more cash from operations ($184M) than they burned on capital expenditures ($179M). This, of course, is a bigly deal because, up until now, Dutch Bros has been that of a friend who keeps borrowing money to “invest in their side hustle.” Meaning, now they’re finally starting to pay their own friggin ‘rent without diluting the sh*t out of existing shareholders. What a concept. 

(Source: Nasdaq) 

Additionally, Dutch Bros currently has 950 locations today, but management has its eyes on a mind-blowing goal of 4,000 shops in the next 10-15 years. Meaning, they want to quadruple the number of places that Americans can get diabetes in a cup while sitting in traffic. And the best part? They might just pull it off. Especially considering Dutch Bros’ new found positive FCF means they can fuel this growth without constantly begging the market for more cash (hence the dilution soundbite above). 

(Source: CNBC) 

But, but, but… what about their main competitor Starbucks? Yeah, what about them? Brian Niccol is still in the process of pissing off their customer base with ending discounts and price reductions while Dutch Bros is silently diversifying into the food game. Whereas, after testing a few menus at six locations, Dutch Bros is getting ready to roll out a more comprehensive food strategy presumably because watching Starbucks sell $7 breakfast sandwiches made them jealous. Now sure, food’s only 2% of sales now, but throw in some pricey, yet tasty breakfast options, and that could easily be a nice jolt into overall revenue numbers. 

(Source: Giphy) 

On the other hand though, Dutch Bros is rocking a Price to Sales ratio of 7, which is roughly double that of Starbucks.In other words, investors are paying premium steakhouse prices for what's essentially a drive-thru sugar shack. But hey, when you’re posting 28% year-over-year revenue growth and breaking even on FCF, maybe you deserve to be a little expensive. After all, growth is the name of the game here, and Dutch Bros is clearly doing something right.

(Source: Giphy) 

Which is why Dutch Bros CEO, Christine Barone, is laser focused in keeping the momentum going. For instance, on the Q3 earnings call, she couldn’t stop word vomiting over the brand’s strength and the love from customers. They’re seeing increased sales from iced drinks and personalization — two things Dutch Bros customers apparently can’t live without. Oh, and if you were one of the lucky ones who snagged a free rubber ducky on National Coffee Day, congrats. You’re part of the hype machine that helped drive sales volume during the promotion.

(Source: Dutch Bros) 

So, where does Dutch Bros go from here? Well, the company plans to open at least 160 new shops in 2025, presumably positioning them strategically wherever a Starbucks already exists. Meaning with a P/S ratio of 7 and a P/E ratio hovering around 120, they're either the next big thing or the most elaborate caffeine-fueled pyramid scheme since that time your cousin tried to sell you essential oils.

In the end, Dutch Bros continues to prove that the American Dream is alive and well, as long as that dream involves turning liquid sugar into solid gold while making Wall Street analysts question everything they learned in business school. So yeah, there’s that.

Now of course, do what you will with this information, but from the looks of it - Dutch Bros has officially positioned itself as a serious threat to the Starbucks hype. With their accelerated growth, and a roaring 51.90% YTD stock surge, Dutch Bros is clearly winning. And when it comes to investors - that’s the only thing that matters. Meaning, place your bets accordingly, friends and as always, stay safe and stay frosty! Until next time…

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Stocks.News holds positions in Starbucks as mentioned in the article.