Keeping Our Price Target on This 'Guilty Pleasure' Play With Story Intact
Following earnings, here's what we’re watching to revisit our rating.
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We are reiterating our $85 price target on Dutch Bros BROS following the company’s March-quarter results, which included better-than-consensus top-line and bottom-line results as well as reaffirmed guidance for 2025.
Exiting the quarter, Dutch Bros had 1,012 locations, plans to add 130 more shops this year, and reiterated its target of 2,029 by 2029. For context, Starbucks SBUX had more than 17,000 locations across the United States, exiting the March quarter. That reaffirms our view that Dutch Bros has ample room to expand its footprint in the coming years without risking oversaturation, and the targeted food rollout for 2026 should be an added top-line driver.
The expansion effort for this year and expected same-store sales of 2%-4% led the company to call for 2025 revenue of $1.555 billion-$1.575 billion, up 22% year over year at the midpoint. Some may question why the management team did not lift its 2025 revenue forecast after March quarter revenue of $355.2 billion topped the $344.3 million. We’d argue that in the current environment, Dutch Bros is taking a more conservative stance, which is not surprising for a company with a growing track record of besting market forecasts.
Management also reiterated its adjusted EBITDA guidance for this year of $265 million-$275 million, which implies a margin level just over 17% compared to 18% last year. To be clear, that is a reiteration of the guidance delivered in mid-February and includes the impact of elevated coffee costs due in part to tariffs.
Less than 10% of Dutch’s current cost of goods sold basket is sourced internationally, with coffee being the majority of that. Dutch Bros sources its coffee from Brazil, Colombia, and El Salvador, which as of today face a 10% import tariff. Management shared on the corresponding earnings call that it has substantially locked in coffee prices for the remainder of 2025.
All in all, we would say the BROS story is very much intact, and the company’s comp sales during the quarter show that while consumers are becoming more selective in their spending, they continue to spend on what we’ll call guilty pleasures. As the fall in oil prices flows through to lower gas prices, we should see this continue.
In terms of BROS shares, while there is ample room to our price target to warrant an upgrade to a One rating from Two, we’re inclined to hold off until we have more clarity on upcoming trade talks. Should we see more deals announced that point to lower tariff levels and potentially lower-than-feared inflation, we’ll revisit our BROS rating.
As we update the Pro Portfolio’s position panic points, we’ll do the same for BROS shares.
At the time of publication, TheStreet Pro Portfolio was long BROS.
