Best Stock to Buy Right Now: Starbucks vs. Dutch Bros

If you like to get your daily caffeine fix, you probably have passionate opinions about who makes the best cup of coffee. Starbucks (SBUX 0.73%) has been the king of cafes for decades, but the newcomer Dutch brothers (BROS 2.27%) is growing in popularity as it expands across the country. These are both popular brands, but which is the better stock pick today? Let's see how they compare.

Strong growth for Dutch Bros, but the rewards go to Starbucks

Starbucks operated more than 38,000 stores at the end of the first fiscal quarter of 2024 (ended December 31). It's a coffee giant unrivaled anywhere else in the world, and it's rapidly encroaching on McDonalds leader as the world's largest restaurant chain (McDonald's has more than 40,000 locations).

Dutch Bros, on the other hand, only had 831 stores at the end of 2023, and in some ways it's not even a competition. However, investing is all about the future, in which case Dutch Bros' small size could be an advantage, as it has the potential to grow even more. In terms of revenue growth, there is no comparison.

SBUX Revenue (TTM) data by Y Charts

As Dutch Bros opens new stores at a rapid pace of more than 150 stores per year, it adds strong incremental growth to its low total of $913 million over the past 12 months, compared to Starbucks' $37 billion.

However, as compelling as this may sound, it is not that simple. Starbucks has reported much better comparable sales growth than Dutch Bros in the most recent quarters, despite its much larger size.

Business Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023
Starbucks 5% 11% ten% 8% 5%
Dutch brothers (0.6%) (2%) 3.8%


N / A

Data sources: Starbucks and Dutch Bros. Quarters shown relate to the calendar year.

The Starbucks brand gives it a real advantage, even if its high growth phase is over. Dutch Bros may have plenty of opportunities, but they can't compete with the Starbucks brand at this point. Starbucks plans to open more than 3,000 stores in the next few years, while Starbucks sees the opportunity to open more than 10,000 stores worldwide. It won't bring the same percentage growth rate, but it will add a lot more revenue.

Risk, Growth, Opportunity and Value

The case for Starbucks revolves around this branding piece. Not only does it live up to the name, but it also has the scope and scale to get stores up and running quickly. She has years of experience and an existing network that she can leverage to grow profitably. It also has pricing power.

Because it is a global company, it is less sensitive to geographic issues. For example, when China was in lockdown last year, its other regions performed well. During the most recent quarter, the company managed to overcome geopolitical headwinds to post competitive growth and rising profits.

The case of Dutch Bros is above all a question of potential. It is very popular in its current markets and is achieving higher profitability as it expands, with an increasing contribution margin and two consecutive quarters of positive net profit.

Which stock is better to buy?

I think it's clear at this point that the answer to this question will largely depend on the type of investor you are or the type of stocks you are looking to buy at the moment. Starbucks enjoys a strong advantage in unmatched brand value and scale, as well as a reliable expansion pipeline and earnings picture. It also pays a growing dividend that yields 2.5% at the current price. This is a great value choice.

If you have an appetite for risk, Dutch Bros may offer the opportunity for higher growth. There are many reasons to be confident about its prospects, but there are still unknowns. The best purchase is the one that meets your current needs.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool posts and recommends Starbucks. The Motley Fool has a disclosure policy.

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