Shares of Dutch Bros Inc (NYSE:BROS) shares are trading higher after TD Cowen analyst Andrew Charles upgraded the stock from Hold to Buy and raised the price target from $33 to $46.

On Tuesday, Dutch Bros reported quarterly earnings of 9 cents per share which beat the analyst consensus estimate of 2 cents by 350%.

Quarterly sales clocked in at $275.1 million, beating the analyst consensus estimate of $254.5 million by 8.09% and representing a 39.46% increase over sales of $197.27 million from the same period last year.

In the analyst’s view, Dutch Bros is demonstrating traction with the turnaround that leads the analyst to believe 2024 sets up as a beat & raise year. 

According to the analyst, efforts with beverage innovation, more targeted offers for the Dutch Rewards loyalty program (2/3 of transactions) & paid advertising are paying off.

The analyst now models 2Q24-4Q24 same store sales of 4.5%, 3.5%, 3.0% from 2.7%, 2.2% & 1.8% versus. 2.9%, 2.2% & 1.5% consensus, respectively.

The analyst conservatively estimates a 3.5% mobile order contribution to 2025 comparable sales, using Starbucks Corporation‘s (NASDAQ:SBUX) 2016 experience as an analog.

Following two consecutive years of deterioration in new store sales volumes for the class of 2022 and 2023 store openings, the analyst suggests a sequential improvement in sales volumes from 4Q23 to 1Q24.

The analyst models street-high 2024-26E adj. EBITDA of $215 million, $275 million & $350 million, which are 4%, 10% & 15% above consensus, respectively.

The shares present an asymmetric risk/reward given the upcoming launch of mobile ordering at 50%+ of locations by 2024-end that will drive same store sales upside in 2025 and perhaps 2026, said the analyst.

Price Action: BROS shares are trading higher by 7.8% at $35.37 at last check Friday.

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