Dutch Bros, IBD Stock Of The Day, broke out above a buy point Thursday in heavy trading.
The drive-through coffee kiosk chain has grown to more than 1,000 locations in 18 states, including about 30% that are franchised. While rival Starbucks dwarfs the store count with more than 40,000 locations worldwide, Dutch Bros is an up-and-coming brand.
Dutch Bros' three-year sales growth rate of 34% laps Starbucks' 6% rate, according to IBD MarketSurge. Dutch's three-year EPS growth rate is 64%, fifth highest in the restaurants industry group.
The company differentiates itself in various ways. For example, it has funky drink names like the Annihilator and the 9-1-1, which jolts you with six shots of espresso, half-and-half and Irish cream syrup. Last year, it introduced coffee with protein. Mobile orders and speedy service are other positive drivers analysts have noted.
But Dutch Bros faces elevated coffee prices and tariff costs. Although the price of Colombian coffee, for example, has fallen 15% from a late-April high, it remains more than 100% above the October low, according to FactSet.
At a William Blair conference Tuesday, CFO Josh Guenser said the company has locked in the majority of its coffee needs for the remainder of 2025. That's built into the company's guidance, as well as an expected 10% tariff on three countries where Dutch buys its coffee beans.
"So we feel like we have the ability to absorb that and it's something that we'll watch," Guenser said, per a transcript from FactSet.
Dutch Bros Beats Expectations
Dutch Bros stock climbed back above the 50-day moving average on May 8, after the company gave a bullish first-quarter earnings report. Sales and earnings topped even the most optimistic analyst expectations.
First-quarter sales rose 29% to $355.2 million, as same-store sales increased 4.7% year over year. Earnings jumped 56% to 14 cents a share.
The company said at the time its strong Q1 performance and momentum carrying into the current quarter means it's on track to reach the top half of its full-year guidance: It forecast sales of $1.555 billion to $1.575 billion and same-shop sales growth of 2% to 4%.
Stock Rallies Above Buy Point
While the May 8 move provided an early entry into Dutch Bros stock, it wasn't as significant as Thursday's breakout.
Shares climbed above the 73.93 buy point of a cup-with-handle base, according to MarketSurge pattern recognition. Volume was tracking 300% above average, a sign that institutional investors are buying heavily.
The base was deeper than normal, with a total decline of 46% and a decline in the handle area of 13%. Bases deeper than 30% or so have a bigger hill to climb to reach new highs than shallower patterns.
Still, Dutch Bros is one of the highest-rated stocks in the IBD's highly rated restaurants industry group. The stock has a Composite Rating of 97, an EPS Rating of 98 and a Relative Strength Rating of 96.
Dutch Bros stock has a 21-day average true range (ATR) of 4.59%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
Dutch Bros stock was added to IBD Leaderboard and SwingTrader after Thursday's breakout.
