Dutch Bros Shares Crash 40% on Slashed FY Profit Outlook, Stifel Downgrades to Hold on Lack of Margin Visibility

© Reuters. Dutch Bros (BROS) Shares Crash 40% on Slashed FY Profit Outlook, Stifel Downgrades to Hold on Lack of Margin Visibility

Shares of Dutch Bros Inc (NYSE:BROS) are down almost 40% in premarket trading Thursday after the company issued a weaker-than-expected FY guidance.

BROS reported Q1 revenue of $152.2 million, beating the consensus estimates of $145.9 million. Adjusted EBITDA stood at $9.66 million in the period, short of the analyst consensus of $12.8 million.

For the full fiscal year, the company expects total revenue in the range of $700 million to $715 million, below the analyst expectations of $717.2 million. BROS expects FY adjusted EBITDA of at least $90 million, down from its previous forecast range of $115 million to $120 million, while analysts were looking for $108.1 million.

“Our substantial top-line revenue growth of 54% was primarily driven by the 107 company-operated shops opened over the past twelve months, a 56% increase, including 34 during the first quarter, and same shop sales of 6.0%,” the company said.

BROS also said it expects to open “at least” 130 new shops in 2022.

Stifel analyst Chris O’Cull downgraded to Hold from Buy with a $30.00 per share price target (down from $70.00) as he laments the lack of margin visibility.

“It's unclear to us why SRS has slowed. The company cited macro-related factors, such as rising gas prices, but the 3-year stack appears to have been stable in April relative to 1Q, so it could just be tougher comparisons; regardless, management was bearish about the SRS outlook. Our concern is that weaker SRS performance increases the risk of raising menu prices to combat margin pressure. And shop-level EBITDA margin compressed roughly 840bps in 1Q and will likely remain under significant pressure the next six months. Consequently, we prefer to move to the sidelines until we gain confidence in the stability of EBITDA growth,” O’Cull said.

BofA analyst Sara Senatore cut the price target to $64.00 per share from $80.00 but remained Buy-rated.

“While the stock came under intense pressure AMC, we believe at least part of the disappointment was a function of mis-steps by a newly public company (e.g., failing to communicate G&A expectations)... Given how much of the stock’s value rests in the long term store growth potential – which is unchanged – we view the current sell-off as an enhanced buying opportunity,” Senatore told clients.

By Senad Karaahmetovic