Why Dutch Bros Stock Soared 27% in February

Shares of Dutch Bros (NYSE: BROS) stock jumped 27% in February according to data provided by S&P Global Market Intelligence. It reported phenomenal fourth-quarter results, and the market is getting more excited about its opportunities.

Another cup of coffee

Dutch Bros is growing by leaps and bounds, and it surpassed the 1,000-store mark last month. That's large enough to know that it's resonating with customers, but small enough that the runway remains long and compelling.

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It has a distinctive brand of coffee that it serves in its mostly drive-thru locations, but it has several different store formats to meet demand in different spaces. Although it's based in Oregon and is still concentrated on the West Coast, it's now available in 18 U.S. states and growing.

Performance has been uniformly positive over the past few years, but some quarters have been better than others. The 2024 fourth quarter was a standout, with a 35% increase in sales year over year and a 6.9% increase in same-store sales. It opened 32 new stores for a total of 151 for the full year, and it plans to up that in 2025. Management attributed its success to its strong brand and innovation, its investments in its membership program, and its advertising initiatives.

It's also becoming more profitable as it scales. Company-operated shop contribution margin was 28.9% in the fourth quarter, up from 26.5% the previous year, and net income increased from a $3.8 million loss in 2023 to positive $6.8 million in 2024.

More coffee on the way

Dutch Bros is gaining momentum, and it's making several moves to keep it up. Besides new store openings, it's planning to expand its menu, and it recently rolled out digital ordering throughout its enterprise. It also recently revamped its real estate strategy, and its newer stores are performing more efficiently.

It's expecting revenue to increase 22% this year and for same-store sales to increase 3%, and it's guiding for 160 new stores.

Dutch Bros stock is up 157% over the past year, and it's expensive at this price. It trades at a P/E ratio of 224, which means a lot of growth is already built into the price. If you plan to buy and hold for at least five years, you can take a small position at this point, but you might want to wait for a better entry point or use a dollar-cost averaging strategy.

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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.