'Exceptional Unit Level Economics': Analysts Initiate Coverage Of Dutch Bros Following Quiet Period


Dutch Bros Inc BROS shares gained 15.7% on Monday, continuing the stock’s strong run following its September IPO.

Dutch Bros is off to a hot start to life on the public market and has now more than doubled its $23 IPO price.

In the second quarter of 2021, Dutch Bros reported $114 million in revenue, up 51% from a year ago. The company also turned a profit, a rarity for high-growth IPOs. In the second quarter, Dutch Bros reported $2.92 million in net income, up 10.6% year-over-year.

As of June, the coffee company had 264 franchised locations and 2017 company-owned locations in 11 different states. Impressively, same-store sales were even up 2% in 2020 during the COVID-19 pandemic.

Several of Dutch Bros’ IPO underwriters finally weighed in on the stock on Monday following a mandatory quiet period.

Voices From The Street: Bank of America analyst Sara Senatore said Dutch Bros has “exceptional unit level economics” and secular growth tailwinds.

“Dutch Bros’ beverage only product mix – including the proprietary Blue Rebel energy drink – translates into high gross margins while its level loaded day part mix maximizes labor efficiency; the net effect is Restaurant Level Margins (RLMs) of ~30%,” Senatore wrote in a note.

Barclays analyst Jeffrey Bernstein said Dutch Bros has impressive growth numbers and is operating in an attractive market, but its valuation is full after its post-IPO run.

“Our value bias keeps us cautious today, though fundamentals are intriguing with a trio of comp, unit & margin, which makes a comparable peer group difficult to define,” Bernstein wrote.

Cowen analyst Andrew Charles said Dutch Bros is a rare compound growth story among small and mid-cap restaurant stocks.

“We believe long term comp upside can be achieved by the first inning of a digitally-native loyalty program that we expect to ultimately facilitate 1:1 marketing & mobile ordering,” Charles wrote.

Ratings And Price Targets:

  • Bank of America has a Buy rating and $55 target.
  • Barclays has an Equal Weight rating and $40 target.
  • Cowen has an Outperform rating and $50 target.
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Posted In: Analyst ColorPrice TargetInitiationRestaurantsTop StoriesAnalyst RatingsTrading IdeasGeneralAndrew CharlesBank of AmericaBarclaysCowenJeffrey BernsteinSara Senatore