Dutch Bros Inc. ( NYSE: BROS ) was added as new short idea at Hedgeye with the potential for 50% downside from current levels.
"The relentless focus on excessive unit growth and not balancing that with profitability can create long-term issues for the company (i.e., SHAK)," Hedgeye analyst Howard Penney wrote in a note on Thursday. "We don't see the company generating enough OCF to cover capital spending until FY2026 (and that might be a generous assumption)."
The note comes as Dutch Bros. shares plunged 13% on Thursday in the wake of of Q4 results on Wednesday an d after guidance disappointed. Looking ahead, the coffee retailer sees full-year revenue of between $950M and $1.0B vs. $981M consensus. 2023 adjusted EBITDA of about $125M is expected vs. $142M consensus.
Hedgeye's Penney also highlighted that he believes a "significant" part of Dutch Bros' ( BROS ) problems can be attributed to its doubling of shop count since 2019, especially since the coffee retailer has entered new markets where consumer usage of the concept is different. The "excessive" growth led to a significant slowdown in LTM AUV's in Q4.
Dutch Bros. ( BROS ) short interest is 19.8%.
Last Thursday Guggenheim initiated Dutch Bros. ( BROS ) with a neutral rating.
Also see SA contributor The Rare Opportunities piece from last month entitled "Dutch Bros: The Goal Of Having 4000 Shops Is Not Impossible."
For further details see:
Dutch Bros. a new short idea at Hedgeye