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Dutch Brothers
BROS-N
HOLD
Nov 08, 2024
$47.180
Stock price when the opinion was issued
breweries
beverages
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Starbucks vs. Dutch Bros. and the effect of China
Dutch Bros. grew way too fast. SBUX has a problem in China and the U.S. given the Israel-Hammas war. SBUX will miss its next report given weakness in China and the U.S. So buy SBUX $5 lower, because China is reawakening from its slumber and will come back.
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BROS certainly has strong momentum, up nearly 45% year-to-date and is expensive at 97x forward price-to-earnings. It is expected to grow the top line at 20% annually over the next two years. Recent quarterly results were very strong with EPS beating estimates of 12c coming in at 16c. Revenue was $338.2M increasing 28% year-over-year and beating estimates of $324.8M. BROS has continued it rapid expansion rolling out 38 new stores in the quarter. Results were very strong and the company had breakeven free cash flow following the quarter. We think it looks solid, but would be cautious of debt levels as it does have $647M in net debt and the valuation is expensive.
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