Is Dutch Bros Stock the Next Starbucks?
SBUX) has been a massive wealth creator for long-term
investors. In the last 10-years SBUX stock has generated close to
500% in cumulative gains compared to the
returns of 343%.
Starbucks has 33,800 stores
located all around the world and the company reported revenue of
$8.1 billion in Q4 of fiscal 2021 (ended in September)
which was increase
of 31% year over year. Comparable
store sales rose by 22% in the U.S. and 17% in international
markets. The company’s operating income rose over 200% to $4.8
billion in Q4 of fiscal 2021.
The Starbucks Rewards which is a
loyalty program saw the number of memberships rise to 25 million in
the U.S., an increase of 28% year over year. A stellar performance
in the September quarter allowed Starbucks to increase its
quarterly dividend to $0.49 per share, up from $0.45 per share,
indicating a yield of 1.8%.
Starbucks remains a top growth
stock as its expected to increase total store count to 55,000 by
the end of fiscal 2030. Its revenue is forecast to increase by
12.3% to $32.65 billion in fiscal 2022 and by 8.8% to $35.5 billion
in fiscal 2023. Comparatively, adjusted earnings per share is
forecast to rise at an annual rate of 33.7% in the next five
We can see that SBUX stock is
valued at a forward price to sales multiple of just under 4x and
a price to earnings
ratio of 27.8x which is very reasonable given its growth
Dutch Bros poised to outpace SBUX stock
While Starbucks has increased
shareholder returns at an enviable pace, one stock that is expected
to outpace SBUX is Dutch Bros (NYSE:
BROS). A company
that went public
in September 2021, Dutch Bros’ IPO
was priced at $23. The stock is now trading at $52.84 valuing it at
a market cap of $2.63 billion.
Dutch Bros. offers hot and cold
expresso-based beverages as well as cold brew coffee products
including Blue Rebel energy drinks, tea, lemonade and other
beverages, through its network of company-operated shops and online
Dutch Bros. recently reported its
Q3 earnings and its sales grew by 49.8% year over year to $129.8
million. The company’s adjusted net loss stood at $0.15 per share.
Comparatively, Wall Street forecast Dutch Bros sales at $124.88
million and adjusted loss at $0.20 per share. We can see that Dutch
Bros. beat consensus revenue and earnings forecasts in its first
quarter as a publicly listed entity. It opened 33 new locations in
Q3 taking total store count to 503.
In Q4 of 2021, Dutch Bros
forecast sales between $125 million and $128 million compared to
consensus estimates of $121.2 million. Its same store sales are
forecast to increase by mid-single digits in Q4. The company has
also forecast adjusted EBITDA between $12.5 million and $13.5
million in the quarter ending in December.
The growth story for Dutch Bros
is far from over as it intends to open 4,000 locations in the U.S.
Its sales are expected to increase from $238.4 million in 2019 and
$327.4 million in 2020 to $485 million in 2021 and $670 million in
2022. Comparatively, adjusted earnings is forecast to expand from
$0.21 in 2021 to $0.38 in 2022.
Given these growth rates, BROS
stock is valued at a forward price to 2022 sales multiple of 3.92x
and a price to earnings ratio of 139x. Its evident that similar to
other high growth companies, Dutch Bros. is sacrificing
profitability for top-line expansion.
Analysts tracking BROS stock have
a 12-month average price target of $69 which is almost 30% higher
than its current trading price.
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