Dutch Bros (NYSE: BROS) has resonated with customers due to its engaging culture, customizable cocktails, and drive-through. But the stock hasn't fired up investors' portfolios. As of April 5, shares are 58% below their November 2021 top price at the end of that bull market. However, they have risen 35% in six months, suggesting investor optimism.
Could this coffee stock earn you a millionaire? Investors like growth. Dutch Bros works in a dull industry. It doesn't do cryptocurrencies, cybersecurity, or AI. These companies attract investors seeking rapid growth.
Dutch Bros continues to attract investors seeking enormous returns. That's because this modest coffee chain has enormous intentions. The company now has 831 locations, up 24% in a year. This growth occurred despite higher interest rates and economic uncertainty.
There's more. Investors like Dutch Bros' long-term prospects. Management aims to reach 4,000 locations one day. It would expand fivefold from the current footprint. I understand why the executive team prioritizes new locations. Company-operated stores average $1.9 million in yearly sales and a 28.2% shop-level contribution margin (excluding corporate overhead). These unit economics look good.
Journey won't be easy. Any management team may tout substantial growth to attract Wall Street. Astute investors will assess its likelihood. Dutch Bros may not reach 4,000 outlets.
I suppose this because retail coffee is so competitive. Many independent coffee businesses are well-established in their communities nationwide. Big brands like Starbucks, McDonald's, and Dunkin' Donuts have nationwide marketing.
On paper, Starbucks, the market leader, plans to open about as many U.S. outlets as Dutch Bros. There will be fierce rivalry for clients and good real estate to develop new locations. It's true that Dutch Bros will struggle. Reaching 4,000 stores will be difficult.
Stock that makes millionaires? Dutch Bros appears to be a stock that might make its stockholders billionaires. The executive team prioritizes growth. Profitability should increase as the business grows and generates more income. Positive factors may boost share prices.
Investors must assess the likelihood that Dutch Bros will reach 4,000 U.S. outlets. For clarity, I think the company has little chances. Industry competition is excessive, and its long-term outcome is questionable. If you still believe in Dutch Bros., raising your initial financial outlay and time horizon may increase your chances of reaching a million-dollar position. Currently, I'm not buying the shares.
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