This means customers were starting their orders on the Starbucks app but then abandoned them due to the long wait times. The frustratingly long wait time when customers need to get into the office, avoid a parking ticket and fight traffic can almost be a sign of hubris and arrogance to many.
The morning rush is generally half of Starbucks's business. Over 60% of its morning business comes from Starbucks Rewards members who order with the Starbucks app. Starbucks CEO Laxman Narasimhan pointed out in its earnings conference call, “What's interesting though, despite strong Mobile Order & Pay sales, we saw a mid-teens percent order in completion rate within the order channel this past quarter. In other words, customers using MOP put items into their cart and sometimes chose not to complete their order, citing long wait times of product and availability, here lies opportunity.”
Narasimhan has been actively working on improving the process with tools like an equipment-driven siren system. For the past 6 months, they've been working with the Toyota Production System Support Center to find ways to unlock additional capacity at peak demand times. They will be rolling it out in North American stores in the coming months.
Did the market buy this? Not quite. The markets responded to the Q1 earnings miss by selling off shares by 15.88% the following morning.
On the flipside, Dutch Bros Q1 2024 earnings resulted in an 11% gap the following morning and a 30% run-up in the following three days. Dutch Bros beat EPS by 8 cents as revenues surged 40% YoY to $275.9 million, beating $255.56 million. Additionally, Dutch Bros raised full-year 2024 revenue guidance to $1.20 to $1.214 billion, up from the $1.19 to $1.205 billion previous guidance, vs $1.2 billion consensus estimates.
The company also rolled out its high-protein coffee, which delivers 20 grams of milk protein per medium-sized serving. Dutch Bros also rolled out a boba beverage, which is resonating with Gen-Z-ers. Dutch Bros CEO Christine Barone commented, “Beyond driving traffic, boba boosted average ticket and drove what we believe was an increase in group buying behavior. Based on the strong customer and crew response, I am pleased to announce that we will continue to offer strawberry boba as a premium add-on to our regular menu going forward.”
Dutch Bros plans to open 120 to 125 more stores in 2024 on its way towards 4,000 locations in the next 10 to 15 years. The company opened a record 45 shops in Q1 2024. Dutch Bros is also an asset-light business, with nearly half its stores being franchised. Its Dutch Rewards program hit 66% of all transactions through the app. Same-store sales surged in ticket and traffic. Dutch Bros hit a record average unit volume (AUV) of $2 million. The company is also looking at expansion in China.
Starbucks spills more coffee than Dutch Bros sells. However, it can also be argued that Starbucks has grown too large to be considered a growth stock anymore. Dutch Bros has more room to grow as a business and with its stock price. With over 700 stores on their way to 4,000 locations, this could be considered a ground-floor entry opportunity for investors looking for growth.
BROS is attempting a double top breakout at the $36.17 resistance after accelerating from its Q1 2024 earnings gap at $30.14. The daily relative strength index (RSI) has risen to the 75-band. Pullback support levels are at $32.88, $30.14, $28.50 and $26.91. BROS has an 11.51% short float.
Dutch Bros analyst ratings and price targets are at MarketBeat.
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Get This Free ReportCompany | MarketRank™ | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
---|---|---|---|---|---|---|---|
Dutch Bros (BROS) | 2.8416 of 5 stars | $37.97 | -1.7% | N/A | 210.96 | Moderate Buy | $37.78 |
Starbucks (SBUX) | 4.7108 of 5 stars | $81.43 | 0.0% | 2.80% | 22.43 | Hold | $96.43 |