Dutch Bros: Overdue For A Pullback As Margins Wane

Summary

• Dutch Bros has been an investor favorite, with shares up ~5% YTD and doubling over the past year, but its valuation is now too high at >30x forward adjusted EBITDA.
• The company is seeing relatively weak same-shop growth, as it laps prior-year price increases with arguably little room to raise prices further.
• Higher labor costs are eating into the company's operating margin profile, while coffee tariffs will burden margins through the remainder of the year.
• With steep competition in the coffee arena amid high multiples, it's best to steer clear here.

hapabapa

So far during the tariff-driven pullback, few consumer-facing companies have been spared from investors' skittishness. Dutch Bros (BROS) is one of the few exceptions. The coffee chain, best known for its quick service and efficient drive-through lanes, has been

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.