Is this upstart retailer the next great investment in coffee?
Wall Street has come out with a highly caffeinated outlook for newly minted public company Dutch Bros.
Shares of the upstart coffee retailer exploded nearly 13% to $48 on Monday — making the stock a top trending ticker on Yahoo Finance before midday — after investment banks initiated mostly coverage on the company after its successful late September IPO.
Five analysts initiated coverage with ratings equivalent to Buys, despite shares being up more than 85% since the Dutch Bros's Sept. 15 IPO. The highest price target on Dutch Bros ($60) is shared by Jefferies analyst Andy Barish and Piper Sandler's Nicole Miller Regan.
"These highly attractive returns are underlying unit growth that will exceed 25% for the short-term for company-owned units and mid-teens long term on the way from [less than] 500 locations to a total addressable market of 4,000 plus. The growth algorithm of 20%+ EBITDA [earnings before interest, taxes and depreciation] growth is industry leading and we think will compound significantly and predictably over time," Barish pointed out.
Barish was among several analysts calling out the potential of Dutch Bros to reach 4,000 locations over time, up from 471 or so today.
The Jefferies analyst also gave Dutch Bros high marks for its ESG efforts, an element increasingly becoming important to institutional investors.
"The ESG profile is impressive with Dutch Bros. being a value-driven organization. Efforts stem from the co-founder via frequent philanthropy events, well-treated staff, and a 100% renewable energy target by '25," Barish noted.
It doesn't hurt Dutch Bros investment case that it arrived to public markets with its business model being nicely proven out.
Through the first six months of the year, the company saw sales rise 65% to $180.9 million. Operating profits rose to $9.6 million from $7.6 million a year earlier. The company drove $10 million in operating profits in 2020 despite the effects of the pandemic on the restaurant industry.
Dutch Bros President and CEO John Ricci told Yahoo Finance Live it will be "somewhere on the eastern seaboard in the next maybe three, four years."
And bullish analysts will likely be there to channel check the store openings.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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