There Is Potential For Solid Gains In This Coffee Stock, According To Analysts

Wedbush believes that Dutch Bros has a higher upside in 2023 than investors expect and that there may be a further gain to be realized.

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Setyan, an analyst with Morgan Stanley, raised the recommendation on shares of the drive-thru coffee franchise from neutral to outperform. His price target for the shares remains at $37, which implies a 14.9% upside from Tuesday's closing price which was $36.7. 

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Despite management's consistent and clear messaging it remains frustratingly difficult to predict near-term performance growth rates for same-store sales despite the consensus projections. Nevertheless, given the cadence of new operations, we anticipate that revenue in 2023 is going to be between the top and bottom end of our guidance" Setyan wrote in a note he issued on Wednesday. 

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According to Setyan, the current valuation of BROS is an overly pessimistic assessment of its long- and medium-term annual growth algorithm at any given point in time. As well as the strong rewards program offered by Dutch Bros, Setyan believes that the company's sales will also be driven by this program. 

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“As part of the company's ongoing strategic plan, management is focused on increasing the value of Rewards as a whole, and this is both reflected in the current promotion for pre-loading as well as the continued growth of Rewards members and tenders, which should be supporting throughput,” said Satyan. 

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On Wednesday morning, shares of Dutch Bros were up 3.8% following the upgrade reported by the company. Stocks in the company have gained 14.2% over the past year. The price has, however, fallen by nearly 40% in the past year compared to the same period last year.

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