Why Dutch Bros Stock Fell 11% in January

Shares of Dutch Bros (NYSE: BROS) stock dropped 11% in January, according to data provided by S&P Global Market Intelligence. There wasn't any news specific to the coffee shop company, but the stock has been sliding over the past few months as the market worries about the strength of the U.S. consumer.

Image source: Dutch Bros.

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Great coffee, fast service

Dutch Bros' model is based around speed, service, and a fun environment. Its store fleet is almost entirely drive-thru, but its broistas walk through the lanes taking orders, which creates a connection and gets orders prepared quickly. It offers a wide range of exclusive custom beverages, as well as an expanding food menu that complements different parts of the day.

The concept is taking off. The company has grown from a small chain of Oregon-based stores to about 500 West Coast stores at initial public offering (IPO) and more than 1,000 stores today. That's doubling over the past four years, and it's aiming to double again over the next four years, reaching 2,029 stores by 2029. Longer term, management envisions operating 7,000 stores nationwide, and it keeps expanding its presence in new states.

So far, it's unfolding into an exciting story. Sales continue to increase at a rapid pace, up 25% year over year in the 2025 third quarter. Comparable sales were up 5.7%, with a 4.7% increase in transactions. It's also becoming highly profitable, with $27.3 million in net income in the third quarter, up from $21.7 million the previous year.

The company is in growth mode, and in addition to opening new stores, it's building a robust membership program and mobile ordering. Since it's young and agile, it's also developing an efficient real estate plan.

Can the stock go back up?

While these are phenomenal results, the market is concerned about how the company will perform in 2026. Inflation is still high, and custom coffee is a luxury. In its favor, its beverages are well-priced as compared to the competition.

Growth is also slowing down as the company scales, even though it's doing well considering the broader operating landscape.

Finally, Dutch Bros stock is quite expensive. Even at the current, lower price, it trades at a P/E ratio of 123, which is truly premium. It can't carry such a high valuation without matching high growth.

Over the next few years, Dutch Bros should continue demonstrating stellar performance, and its expansion plan should bring it much higher revenue. It's hard to imagine that the stock wouldn't be a big success for shareholders, and growth investors could feel comfortable buying today if you have a long time horizon.

Jennifer Saibil has positions in Dutch Bros. The Motley Fool has positions in and recommends Dutch Bros. The Motley Fool has a disclosure policy.