JPMorgan upgraded Dutch Bros Inc. (BROS) to Overweight from Neutral, raising the price target to $35 from $30 per share in a note Monday.
Analysts at the firm decided to upgrade the stock after a "deeper dive" following its financial results and equity offerings.
"Dutch Bros has seen significant changes [in] its capital structure and shareholder base in the past few months. The company completed ~$345m primary equity raise on September 7, which added ~8% to shares outstanding but allowed net debt/ebitda (incl. capital leases) to drop from 4.4x to ~2.0x and provide substantial available liquidity to the company," the analysts explained.
"We rebuilt most of our TAM model but continue to see 4,000 units built by 2037 - from the 3Q23 level of 794 stores," they added. "BROS now has strong available liquidity comprised of $150m of cash + $350m of availability under its undrawn revolver + $200m undrawn delayed draw term loan to provide funding comfort until turning FCF positive in 2027 – until the company reaches our 4,000 unit TAM by 2037 (and official company target of 2032-2037)."
The investment bank was previously concerned about stressed funding levels. However, slower comps and new unit volumes with a stretched balance sheet offset better margin performance and JPMorgan believes the overhang is behind the company.