Shares of Dutch Bros. ( NYSE: BROS ) broke higher in early trading on Wednesday after J.P. Morgan upgraded the restaurant stock to an Overweight rating after having it lined up at Neutral.
Analyst John Ivankoe and team said the recent pullback in shares once again makes a reentry worth considering.
"This discretionary occasion showed more volatility than expected, with 56% of customers under 25 drinking 80% cold beverages and 60% of sales after 12 noon - but employment and stable gas prices are key to more predictable sales."
While faster store growth, more expensive site build outs, and store EBITDA pressure have elevated capital needs for the business, J.P. Morgan sees net debt maxing out at $650m in FY26, which would require ~15% additional equity raised at current prices to take peak debt back to zero.
The firm's new price target of $38 is based on a 4,000 store total addressable market including a 9% discount rate and a 10% equity dilution to meet the capital requirements above the current available facility.
Shares of BROS jumped 4.22% in premarket trading on Wednesday to $30.80 vs. the 52-week trading range of $20.05 to $81.40.
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Dutch Bros stock rallies after J.P. Morgan calls out an attractive entry point