2023-05-10 08:23:45 ET
JPMorgan downgraded Dutch Bros ( NYSE: BROS ) on Wednesday to a Neutral rating from Overweight after the restaurant operator's Q1 results tipped the scale for the firm to the cautious side.
Analyst John Ivankoe pointed to slippage in new unit volumes to ~$31K that is matched with balance sheet risk that is increasingly becoming a front burner issue.
"Given aggressive store growth assumptions and increases in store opening costs, we see the Company hitting against this $500m net debt (excluding capital leases) level as of 4Q24 and are moderating our F24/25 new unit development expectations."
On the valuation front, JPMorgan lowered its price target on BROS to $32 to reflect 4K U.S. system stores with ~3,200 company operated vs. ~800 franchise stores opened by 2036 and an 9.0% annual discount rate. The firm then applied a 10% equity dilution to arrive at the new price target.
Shares of Dutch Bros ( BROS ) fell 6.75% in premarket action on Wednesday.
More on Dutch Bros:
- Dig into the Q1 earnings report
- Read the earnings call transcript
- View the growth metrics
- Check out relative strength index and moving averages
- See the Seeking Alpha Quant Rating
For further details see:
Dutch Bros extends earnings drop after JPMorgan downgrades the restaurant stock