The IPO of Dutch Bros yesterday in the United States on the NYSE was a resounding success, the action of this new competitor of Starbucks having exploded by nearly 60% on its first day of trading. Upon opening, Dutch Bros. stock traded above its IPO price of $ 23, and ended the day at $ 36.68.
This is therefore an opportunity for us to take stock of this promising new action, by reviewing its strengths and weaknesses.
Who is Dutch Bros?
Dutch Bros. is a chain of coffee shops similar to Starbucks, which currently has 470 outlets, compared to over 32,000 for Starbucks.
Its growth potential therefore rests in part on its ability to gain market share from the leader. For this, its positioning in terms of price could help, as Dutch Bros. is clearly a much cheaper alternative to Starbucks.
But the coffee market itself is expected to grow according to economists, which should benefit all stocks in the sector. Indeed, according to a study by Astute Analytica, coffee sold directly to consumers, i.e. the market in which Dutch Bros. operates, is expected to experience a compound annual growth rate of 15.3% between 2020 and 2027. .
An already solid performance before the IPO
Regarding the commercial and financial data of Dutch Bros., it should be noted that they are already very solid, unlike other companies recently introduced on the stock market.
Remarkably, the company saw same-store sales increase during the pandemic at a rate of 2%. Furthermore, business grew at a compound annual growth rate (CAGR) of 16% for new outlet openings from 2018 to 2020, while revenue grew at a CAGR of 33%.
Most recently, company-operated store sales for the full year of 2020 jumped 61% to $ 244.5 million. Looking ahead, 2021 revenue is expected to grow further, as in the first six months sales reached $ 227.9 million, up 51.1% year-on-year .
Conclusion: Should you buy Dutch Bros stock or Starbucks stock?
Before the Dutch Bros. IPO, there was little choice other than Starbucks to capitalize on the coffee industry. This is no longer the case today. So the question is, what is the best investment between Starbucks and Dutch Bros.
Starbucks is currently the dominant coffee chain in many countries around the world. This means that its growth prospects are now limited. On the other hand, the competitive divide between Starbucks and Dutch Bros is such that there is little risk that SBUX will actually be worried about Dutch Bros for a long time.
In the end, if you are an investor who is not afraid to take a few risks, Dutch Bros. is a stock that arguably offers more upside potential than Starbucks. On the other hand, if you want to bet on coffee with a focus on security, Starbucks will be a better choice.