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Goldman Sachs cited a durable competitive moat and strong same-store sales growth as reasons to turn more bullish on Dutch Bros. The investment bank upgraded the coffee chain on Monday to a buy rating from neutral. Goldman Sachs’ unchanged 12-month price target of $75 implies upside of 40% from the stock’s current levels. Shares of Dutch Bros. have tumbled 12% this year and plunged nearly 26% in just the past six months. BROS 1Y mountain BROS 1Y chart “We see the recent pullback as an attractive entry into the best-in-class growth story in all of U.S. Restaurant space, driven by solid SSSG (roughly 2/3 from transaction growth) and strong unit economics supporting mid-teens store growth,” analysts led by Christine Cho wrote. Amid an increasingly competitive coffee landscape, Cho believes that the market is underestimating Dutch Bros.’ fundamental strength and ability to compete. She also called the company a leader in customized energy drinks , and believes Dutch Bros. is positioned to defend its share from incumbents while at the same time resonating with younger consumers through brand excitement. Cho called Dutch Bros.’ competitive moat “difficult for competitors to replicate.” The analyst also expects Dutch Bros. to sustain its best-in-class, same-store sales growth due to both mobile orders and food. “We think food and mobile order could unlock frequency opportunity, and we believe increasing penetration of mobile order pay/Dutch Rewards activation as well as introduction of expanded food offerings could drive more frequent, habitual use occasions — especially in the morning daypart,” she wrote. Cho also applauded Dutch Bros.’ new stores for their higher productivity, alongside an increasing shift toward a more balanced development strategy. “In our view, BROS retains a long runway to expand across new and existing markets, with early traction from the new walk-up window store in LA potentially expanding the long-term [total addressable market] (~7k based on drive-thru only),” she added.
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