Dutch Bros vs. Starbucks: Which Coffee Stock Offers More Growth Potential?

As investors were enjoying the rising stock prices of Starbucks Corp. (SBUX) and Dutch Bros Inc. (BROS), both faced setbacks due to climbing coffee prices. In the past 30 days, Starbucks has seen a decline of more than 4%, while Dutch Bros has fallen over 12%.

The looming threat of tariffs and concerns about a potential recession have added to the challenges these companies face, leaving investors wondering if these stocks are nearing fair value or if they are simply declining in value. Both firms boast strong fundamentals, but in a market hungry for growth, are they worth the investment?

Diverse Situations: A Closer Look

Current Status of Starbucks

$98.11 +2.07 (+2.16%)

As of 03/14/2025 04:00 PM Eastern

52-Week Range

$71.55

▼

$117.46

Dividend Yield

2.49%

P/E Ratio

31.65

Price Target

$105.75

Starbucks and Dutch Bros are both classified as retail stocks, yet they also fall into the category of consumer discretionary stocks. This means that when consumers experience tighter budgets, they may cut back on these regular beverage purchases. Nonetheless, both companies have a loyal customer base that supports them.

Starbucks is a global leader with nearly 17,000 locations across the United States as of February 2025. The business has transformed how people perceive coffee shops, focusing not only on coffee quality but also on the overall experience.

Starbucks’ market dominance is reflected in its financials, having generated $3.10 in earnings per share from $36.1 billion in revenue in 2024, showing a year-over-year decrease in both metrics. This has led to a strategic shift under the leadership of Brian Nichol, former CEO of Chipotle Mexican Grill.

Dutch Bros in the Market

$62.40 +2.79 (+4.68%)

As of 03/14/2025 03:59 PM Eastern

This price is considered fair market value according to Polygon.io. Learn more.

52-Week Range

$26.85

▼

$86.88

P/E Ratio

183.53

Price Target

$75.75

Dutch Bros is relatively new to the public market, having begun trading in 2021. It has attracted a dedicated customer following due to its flavorful drinks and commitment to positive community impact.

However, it has a smaller market presence than Starbucks, reaching its 1,000th location in Orlando, Florida, in February 2025.

Notably, despite a recent downturn, BROS stock has performed well over the past year, with an increase of about 92.6% and a further 11% rise in the year 2025.

Rising Costs for Coffee Lovers

Coffee prices have been on the rise, a fact that regular patrons of popular coffee shops have likely noticed. Specifically, Arabica coffee prices soared over 70% since November 2024, reaching record highs in February—levels not seen since 1977.

The initial reaction to rising costs often points to possible tariffs. The tension around tariffs has contributed to increased coffee futures, particularly following rhetoric regarding a proposed tariff of 25% on imports sourced from the country providing 30% of the U.S. coffee supply. Yet, uncertainty prevails about whether or when such tariffs might actually take effect.

Beyond tariffs, another pressing issue is the “black frost” events in Brazil that adversely affect coffee production. These weather issues coincide with severe drought conditions underlying them.

This situation is particularly crucial since Dutch Bros sources its 100% Arabica beans from Brazil, Colombia, and El Salvador for its signature drink. Conversely, Starbucks, which sources coffee from more than 30 countries worldwide, has a diversified supply chain, yet still consumes about 3% of the global coffee supply, exposing it to the same pricing pressures.

Making a Choice: Starbucks or Dutch Bros?

Both stocks are currently trading at high valuations, making it challenging to favor one over the other. BROS stock is priced at over 111 times forward earnings, contrasted with SBUX stock, which is approximately 35 times its forward earnings.

Regardless of how the valuations are interpreted, it’s clear that investors are paying a premium for growth in both situations. Despite declines, both stocks are trading significantly above their 200-day moving averages.

For growth-oriented investors, existing valuation concerns may need to be temporarily set aside. A drop below the 200-day moving average could present a compelling buying opportunity for BROS stock, given that while it is highly valued, it enjoys strong earnings growth and expansion with reduced susceptibility to fluctuations in coffee prices.

Considering an Investment in Dutch Bros?

Before making any commitments to investing in Dutch Bros, potential investors should proceed with caution.

Research analysts closely follow Wall Street's most recommended stocks. MarketBeat indicates that while Dutch Bros holds a Buy rating, there are other stocks deemed preferable by top analysts at this moment.

It may be worthwhile for investors interested in the next promising technology stock to keep an eye on the landscape and monitor which companies the experts believe are positioned for success.

stocks, coffee, investment