BROS Stock Hits 52-Week High: Should You Buy Now or Wait for a Dip?

Shares of Dutch Bros Inc. BROS have been showing impressive gains of late. On Tuesday, the stock reached a new 52-week high of $53.29 before closing slightly lower at $52.97.This milestone comes amid stellar third-quarter results and an optimistic outlook for the coming years, fueling a 51.6% surge in the stock price since the earnings announcement. The company's strong third-quarter performance exceeded expectations, with a 28% revenue increase and 2.7% systemwide same-shop sales growth, both on a year-over-year basis.The success was fueled by a refined real estate strategy and improved site productivity. Additionally, the rollout of the mobile order platform received positive feedback and is driving operational benefits.Dutch Bros, a high-growth operator and franchisor of drive-thru shops, has carved a niche in the quick service beverage industry with its focus on high-quality, hand-crafted beverages delivered with unparalleled speed and superior service. Over the past three months, BROS has outperformed its peers, including Kura Sushi USA, Inc. KRUS, Chipotle Mexican Grill, Inc. CMG and McDonald's Corporation MCD. The stock has surged an impressive 69.6% compared with the Zacks Retail - Restaurants industry’s growth of 7.8%.BROS' Price PerformanceImage Source: Zacks Investment ResearchWith Dutch Bros firing on all cylinders, investors now face a critical decision: jump in at current levels or wait for a potential pullback?Factors Acting in Favor of Dutch BrosInnovation remains vital to Dutch Bros’ growth strategy. The company’s seasonal offerings, like the Cookie Butter Latte and Caramel Apple Rebel, alongside fan favorites, are creating a buzz. Furthermore, initiatives such as limited-edition sticker drops and exclusive merchandise have strengthened customer loyalty and elevated the brand’s unique identity in the competitive beverage market.The Mobile Order and Pay rollout (covering 90% of its systemwide locations) has been another game-changer. Mobile order customers have increased their visit frequency by about 5%, with mobile orders now representing 7% of the company’s total sales mix. In some U.S. markets, this figure is more than double the overall system average. This growth, combined with paid advertising and effective market planning, has led to improved same-shop transaction performance.Dutch Bros has significantly increased its paid advertising investments, focusing on new and mature markets to drive brand awareness. The impact has been especially notable in Texas, where unaided brand awareness has tripled. These campaigns have directly contributed to improved shop productivity and transaction growth, ensuring Dutch Bros stays ahead of the competition in emerging markets.The Dutch Rewards program continues to be a cornerstone of the company’s customer retention strategy. In the third quarter of 2024, the program accounted for 67% of transactions, with more than 1 million new members joining during the quarter, a record since its launch. The program’s personalized offers and targeted engagement strategies have proven effective in fostering long-term customer relationships.What Next for Dutch Bros?The momentum doesn’t stop there. As of Oct. 31, 2024, the company has processed approximately 2.8 million mobile order transactions, with customers showing strong enthusiasm for the service. Over 90% of mobile order users are satisfied, expressing a likelihood to use the channel again and recommend it to others. Additionally, Broistas has embraced mobile orders, providing excellent service with a high order accuracy rate of nearly 95%. Tip rates for mobile orders also exceed those of other channels.Dutch Bros initiated a limited food test in six locations, exploring bakery items and hot food options. Early results suggest that a more expansive food menu could play a significant role in future growth. It is proceeding cautiously, planning further tests while ensuring quality service and support for its Broistas.The company’s real estate strategy and investment in new markets are proving successful, enhancing new shop productivity. Dutch Bros has invested significantly in its development team and processes, positioning the company for continued growth. In 2025, the company plans to open at least 160 new shops, with accelerated growth expected in 2026. It remains confident in its long-term growth prospects, supported by strong revenue, innovation, advertising, and an expanding mobile order base.Upgraded 2024 Guidance Lifts Confidence in BROSThe company raised its guidance for 2024. Dutch Bros now projects total revenues for 2024 to range between $1.255 billion and $1.260 billion, an increase from the previous guidance of $1.22 billion to $1.23 billion. The company expects to open 150 systemwide shops in 2024, aligning with the lower end of its earlier outlook of 150 to 165.Same-shop sales growth for 2024 is anticipated to be approximately 4.25%, up from the previously forecasted low single digits. Adjusted EBITDA for 2024 is now estimated to be between $215 million and $220 million, reflecting an increase from the earlier projection of $200 million to $210 million.The Zacks Consensus Estimate for BROS’ 2024 and 2025 earnings per share has moved up 15.4% and 16.7%, respectively, in the past 60 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.Image Source: Zacks Investment ResearchBROS’ Technical and Valuation InsightsTechnical indicators suggest continued strong performance for BROS. As of Tuesday, Dutch Bros stock was trading above its 50-day moving average of $37.96 and its 200-day moving average of $35.01. The technical strength underscores positive market sentiment and confidence in BROS’ financial health and prospects.BROS Stock Trades Above 50 and 200-Day Moving AverageImage Source: Zacks Investment ResearchAs BROS has outperformed the industry in the past three months, its valuation looks a bit stretched compared with the industry average. BROS is currently valued at a premium compared with its industry on a forward 12-month P/S basis. The company’s forward 12-month price-to-sales ratio stands at 5.46X, higher than the industry’s average of 4.11X.Image Source: Zacks Investment ResearchOur ThoughtsDutch Bros has shown exceptional performance, reaching a new 52-week high and outpacing competitors. The company's robust innovation strategy, mobile order adoption, and expansion efforts are driving strong sales and customer loyalty, positioning it for sustained success.Furthermore, positive analyst revisions instill confidence in BROS' future prospects. While the stock is trading at a premium, the company's strong revenue growth, strategic investments in advertising, and rapidly growing customer base make it a compelling buy for investors. Given its continued momentum and a promising outlook, we believe that this Zacks Rank #2 (Buy) stock is an ideal candidate for the respective investor's portfolio addition.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report McDonald's Corporation (MCD): Free Stock Analysis Report Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report Kura Sushi USA, Inc. (KRUS): Free Stock Analysis Report Dutch Bros Inc. 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