Whenever it looks like a company is too huge to be challenged, there will always be a smart entrepreneur who will find the niches that aren’t being met and crack them open. That’s what’s been happening with coffee chain Dutch Bros (NYSE: BROS). It can’t really compete with giant Starbucks, but instead, it’s found a way to connect with its customers with its own culture and set of rules, and it’s taking off.
Investors had high hopes for Dutch Bros when it went public in 2021 at a time of unprecedented initial public offering (IPO) activity and wild investor sentiment. That bull market popped, and many hot stocks have dropped into bargain territory. Here’s why you might want to add Dutch Bros stock to your buy list.
Not trying to compete
Dutch Bros isn’t trying to become the next Starbucks. It’s actually been around for 30 years as a small chain, and over that time, it’s developed a distinct identity with a focus on friendly “broistas” and a chill, fun atmosphere. However, along with that, it’s serious about speed and customer service, and broistas often walk through the drive-thru lanes taking orders (with a smile). It’s also cheaper than Starbucks.
It may be the work of a small-time entrepreneur, but it’s already expanded to more than 800 stores in 17 states. Much of that growth has happened recently, since the company decided to expand the chain and go public. The founder-CEO has stepped down to make way for a serious executive team to lead it forward as it keeps growing.
And growing it is. Revenue increased 39% in the 2024 first quarter. Even better, the company’s same-store sales have made a comeback after undergoing pressure last year and were up 10% year over year in the first quarter.
Where is Dutch Bros heading? Management is aiming for 4,000 stores over the next 10 to 15 years. If it can continue to grow at its current pace, it should be able to scale efficiently and profitably. It may not become the next Starbucks, but it could be a stellar stock to own if it can achieve this. That’s why restaurant stocks at this early growth stage look so enticing; if you…
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