JPMorgan says that Dutch Bros’ shares could come under threat as coffee chains like Dutch Bros are forced to reduce discretionary spending because of high inflation. JPMorgan reduced Dutch Bros’ shares from overweight to neutral on Wednesday. Dutch Bros stock price target was maintained by JPMorgan at $40. This is in keeping with Tuesday’s closing price of 40.26. John Ivankoe, JPMorgan’s research analyst, stated that Dutch Bros was a discretionary stock and can be trimmed back when things feel tighter. The current valuation is still high and the near-term outlook for Dutch Bros are difficult. This would lead to a reduction in value. JPMorgan reported that Dutch Bros’ transactions accounted for 82%. The majority of Dutch Bros business is done after noon, which serves mostly young and female consumers. Ivankoe stated that this event is not part of the morning routine. JPMorgan noted that the coffee chain faces labor difficulties. The firm pointed out that hourly turnover increased from 56% to 66% during the first quarter 2022. JPMorgan warned that Dutch Bros’ capital needs have increased. Ivankoe stated that “we note that the projected capital intensity has increased since the initiation,” and that bank financing was being used for the FCF negative business. Dutch Bos’ shares have dropped 20.9% so far this year, and are more than half of their peak in November 2021. —CNBC’s Michael Bloom contributed reporting.
