Prediction: Dutch Bros Stock Could Skyrocket in the Next 5 Years. Here's 1 Reason Why.
Key Points
Dutch Bros expects to double store count in five years.
It sees a future opportunity to increase store count sevenfold.
It's scaling profitably.
- 10 stocks we like better than Dutch Bros ›
Coffee chain superstar Dutch Bros (NYSE: BROS) has been reporting impressive growth, and its stock has reflected that over the past few years. However, this year it's taking a bit of a breather, trailing the market and up only 1% year-to-date on October 20.
But there are many reasons to believe it can bounce back and deliver spectacular gains for investors over the next five years. This is one of them.
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Image source: Getty Images.
A Dutch Bros store on every block?
Dutch Bros is a fairly small player in coffee chains, with just over 1,000 stores in the U.S. That's a drop in the bucket compared to leader Starbucks, which operates more than 41,000 global stores, including 17,000 in the U.S. alone. But things have been going so splendidly that management recently said it envisions eventually having 7,000 stores, with a concrete goal of operating 2,029 stores by the year 2029, or doubling the store count in four years.
Doubling store count that quickly should have the effect of more than doubling sales, as comparable sales should keep increasing in addition to the revenue from new stores.
The company has been scaling profitably, with positive and growing net income, and free cash flow is turning positive as sales are increasing enough to cover capital expenditures on new store development and have some cash left over.
As Dutch Bros continues to scale with new stores over the next five years, expect the stock to follow.
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Jennifer Saibil has positions in Dutch Bros. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.
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