New Dutch Bros Price Target as New Openings Weigh on Margins

The market is once again moving lower on renewed concerns over the AI trade and stock market valuations, with the latter being prompted by comments from Apollo Global Management.

That is helping pull shares of Dutch Bros (BROS) lower despite the company’s September quarter beat that was predicated on its ongoing footprint expansion and systemwide same-store sales that rose 5.7% year over year. In our note discussing Costco’s (COST) October sales, we called out comp sales figures for the likes of McDonald’s (MCD) , Cava (CAVA) , Chipotle (CMG) and Starbucks (SBUX) . Revisiting those figures against Dutch’s same shop sales, it’s clear that it and Costco are both winning consumer wallet share.

For the September quarter, Dutch delivered total revenue of $423.6 million, up more than 25% year over year, and $10 million ahead of market expectations. EPS for the September quarter came in at $0.19 versus the $0.17 consensus and $0.16 in the year-ago quarter. In looking at that more modest year-over-year EPS growth figure compared to its top-line growth for the quarter, Dutch’s footprint expansion was a headwind in the quarter as it opened 38 shops, bringing its total to 1,081. As part of that expansion, Dutch also entered five new states during the quarter, which also contributed to that headwind.

That was a brisker pace of store openings compared to 31 in the June quarter and 30 in the March quarter. Based on the company’s shop count target for this year, we expected greater shop openings in 2H 2025, and that is what we’re getting. Based on the now 160 target for this year, that implies a hefty 61 openings, which will be back-weighted in the current quarter. That is a big ramp, and Dutch targets a total of 175 new shop openings in 2026. Our thinking is that any slippage from this quarter will be added to the 2026 target.

That accelerated pace of openings is going to weigh on margins in the near-term, and we see that reflected in the company’s adjusted EBITDA guidance for the current quarter. With management sticking to its adjusted EBITDA target of $285 million to $290 million for this year, it implies a $55 million to $60 million figure for the December quarter. While still ahead of the $48.8 million posted in the December quarter, it’s well below the $76.6 million per quarter average so far this year.

With the opening pace stepping up in 2026 and management reiterating its 2029 shop count by 2029, this leads us to think the margin pressure will be more than a one-quarter speed bump. What the math tells us is that if Dutch delivers 236 new shops between the current quarter and the four in 2026, it will need to add an average of 238 in 2027, 2028 and 2029 to hit its 2,029 target.

With that in mind, we are resetting our margin expansion expectations and subsequently reducing our BROS target to $75 from $85. We expect others will be making similar adjustments, and that is likely to weigh on BROS shares in the near term.

However, because the expansion story remains more than intact, we will continue to own BROS shares to capture the opportunity as the growing footprint matures, margins rebound and EPS growth accelerates. Should we see a more interest rate-friendly environment emerge in 2026, that could be one reason for us to revisit our margin assumption and price target.

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At the time of publication, TheStreet Pro Portfolio was long BROS and COST.