Is Dutch Bros Stock a Buy, Sell, or Hold in 2025?

The S&P 500 has been making its way back up after entering correction territory, but it's still down 3% year to date. Although that gives investors a good glimpse of what's happening in the markets, the S&P 500 is only an average, and it has only 500 stocks.

Among its components, some are doing better than others, although because it's a weighted average, a few of its stocks make a bigger impact. It recently inducted four new stocks into its rankings, which means it took out another four.

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In general, when that happens, it's due to size restrictions. Companies in the composite have to have a minimum $20.5 billion market cap. However, that's also implies it takes in companies that are doing well, since making the cut means they're getting bigger.

One stock you won't see yet in the S&P 500 is coffee chain Dutch Bros (NYSE: BROS). It's just starting out, but it's growing fast, and it's crushing the S&P 500, up 31% year to date. Can it continue? Let's see if it's a buy, sell, or hold this year.

Everyone's drinking Dutch Bros

Dutch Bros started out as a small chain of coffee shops based in Oregon, but it has expanded over the past few years south through California, and it's now heading across the country, opening new stores and winning market share.

At the end of 2024, it had 982 stores, up from 503 when it went public in 2021. Through that time, it has reported robust revenue growth and turned profitable.

It had another blowout year in 2024, with a 32% revenue increase year over year. Same-store sales (comps) increased 5.3%, and company-owned comps were up 6.8%.

It has a franchise model, but as it grows, the franchise collection accounts for less of the total. It opened 151 stores last year, 128 of which were company owned.

Company-owned shops' profit increased 43% with a margin of 29.7%, 1.5 percentage points higher than the year before. Net income skyrocketed from $10 million to $66.5 million in 2024.

Management is expecting 2025 to be a strong year, too. It's guiding for revenue of around $1.56 billion, or a 22% increase over 2024, with a 3% increase in comps. It's also planning to accelerate store openings to 160.

If you haven't tried it yet, you might soon

Dutch Bros is still a fairly small chain, but it has big ambitions. It envisions having 4,000 stores over the next 10 to 15 years, continuing its move east across the U.S.

It recently rolled out mobile ordering throughout its chain, and it's expecting that to add another layer of revenue, as well as generate higher loyalty with its membership program. Management said that its customers are "enthusiastically" embracing the mobile program, and it's adding to the morning rush, especially for coffee-based beverages.

Customers using the mobile app are increasing their order frequency, and mobile penetration in newer markets is more than double the levels of the company total, which means that it could be a game-changer as Dutch Bros continues to roll out new locations.

Since it's just getting started, it has an edge in opening new stores in formats that fit current demand per location. All of its stores have drive-thru, and some have eat-in areas and walk-up windows. The drive-thru focus complements its values of speed and customer service, and broistas -- as it calls its employees -- will often walk through the drive-thru line to take and serve orders.

Did you miss the chance to buy?

Dutch Bros stock has doubled over the past year, and it's not cheap at this price, trading at 82 times forward one-year earnings at the time of this writing.

Shareholders might be tempted to take their profits at this stage, but I would say that's a mistake, because there's so much more room to grow. Warren Buffett calls selling your winners "cutting the flowers and
watering the weeds."

As for buying, you should know in advance that you're not getting a bargain. It makes sense to buy if you have a long time horizon and can wait out any bumpiness as you go along on Dutch Bros' journey. If you have that time available and some appetite for risk, you can buy the stock today.

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.