Dutch Bros Inc (BROS – Research Report), the Consumer Cyclical sector company, was revisited by a Wall Street analyst yesterday. Analyst Brian Mullan from Piper Sandler upgraded the rating on the stock to a Buy and gave it a $37.00 price target.
Brian Mullan has given his Buy rating due to a combination of factors that indicate a positive outlook for Dutch Bros Inc. The analyst’s optimistic stance is influenced by the company’s performance, particularly after its fourth-quarter results, and strategic moves such as the equity raise in September and the strength of same-store sales (SSS) growth. Additionally, the anticipated benefits from the implementation of Mobile Order & Pay within the year have been considered a potential catalyst for future growth. While acknowledging the risks associated with the company’s balance sheet leverage and capital expenditure, Mullan sees the current setup as a favorable entry point, warranting an upgrade from a previous Neutral position.
Mullan’s analysis includes an in-depth review of Dutch Bros Inc’s financial dynamics, factoring in the net cash position post-equity raise and the net leverage when accounting for finance leases. Despite anticipating negative free cash flow in the near term due to capital expenditures surpassing adjusted EBITDA, the analyst expects the company’s debt levels to increase. However, the possibility of a positive cash flow turnaround in the following years remains open. This, along with a comprehensive understanding of the factors needing close monitoring, such as discretionary spending, inflation, and interest rate exposure, provides a foundation for Mullan’s confident Buy rating on Dutch Bros Inc’s stock.
In another report released on February 22, Stifel Nicolaus also maintained a Buy rating on the stock with a $40.00 price target.
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Dutch Bros Inc (BROS) Company Description:
Dutch Bros Inc is a growing brand in the foodservice and restaurant industry in the United States. It has two operating segments. The company-operated shops segment, which is the key revenue driver, represents coffee shop sales to customers. The Franchising and other segment represents bean and product sales to franchisees and includes the initial franchise fees, royalties, marketing fees, and lease income.
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