On October 6, a caller asked whether Dutch Bros Inc. (NYSE:BROS) remained a good long-term investment or whether they should sell. Mad Money host Jim Cramer pointed to competition, including Starbucks Corporation (NASDAQ:SBUX), before explaining how he would approach the stock:
It’s down 36%. I happen to like the business. There’s a competitor that’s come in very hard. And we also know Starbucks is coming, you know, I think it’s coming back under Brian Niccol. But at this price, with a $6.8 billion market cap and now at $39, I think you got a great place to start. The chart’s horrible. Be aware, people are going to be dumping it. If it goes down, it’ll feed the fire. 39, then 36, then 33 is the way I would do it.
Cramer had already questioned whether Dutch Bros’ decline reflected more than its operating outlook. His September explanation focused on a possible trading dynamic, rather than deteriorating sales.
Dutch Bros Keeps Expanding While Starbucks Regains Traffic
Dutch Bros Inc. opened 48 shops in the second quarter, bringing its network to 1,225 locations. Revenue increased 32.5% to approximately $550.9 million. Growth extended beyond new openings. Systemwide same-shop sales rose 5.8%, including a 1.7% increase in transactions. Company-operated same-shop sales increased 8.3%, with transactions up 3.4%.
Management raised its 2026 revenue outlook to approximately $2.1 billion – $2.13 billion and continued to target at least 185 new shops. That expansion differentiates Dutch Bros from Starbucks’ much larger, established network. Cramer’s interest in Dutch Bros predates this pullback. In an earlier discussion of the company’s earnings potential, he paired his optimism with a buying caveat that remains relevant today.
Starbucks Corporation reported a 7.9% increase in U.S. comparable sales in its fiscal third quarter, supported by 4.2% transaction growth. Adjusted earnings per share rose 70% to $0.85, while adjusted operating margin expanded to 14.4% from 10.1%. These results provide evidence for the recovery under Brian Niccol that Cramer described. Starbucks’ consolidated revenue declined 1% to approximately $9.3 billion, but the comparison was affected by converting its China retail operations into a licensed joint venture. It should not be read simply as weaker customer demand. The recovery also leaves an opportunity within Starbucks’ existing stores. An earlier examination of its turnaround explored where additional visits could come from beyond the morning coffee rush.
Similar Earnings Multiples Leave Both With Work to Do
Dutch Bros Inc. trades at approximately 33.4x forward earnings, compared with 31.9x for Starbucks. Despite its share-price decline, Dutch Bros was not trading at an earnings discount to its larger competitor. Its enterprise-value-to-EBITDA multiple was also higher, approximately 26.1x versus 22.2x.
Dutch Bros’ expansion requires substantial investment. Its 2026 capital-spending forecast was $350 million – $370 million. The company also identifies suitable shop locations, labor availability, commodity inflation and discretionary spending as risks. Its company-operated shop gross margin slipped slightly to 24.2% from 24.3%, despite strong sales growth.
Starbucks Corporation faces a different challenge. Turning returning customers into sustained margin improvement while funding its turnaround. North American operating margin increased only 30 basis points to 13.6%, as restructuring costs, labor investments and product mix offset part of the sales benefit. Tariff refunds also helped quarterly profitability, so the improvement was not entirely operational. Operating results are not the only influence on Starbucks shares. In July, Cramer included the company among stocks whose selling he attributed to a broader market rotation, offering a different explanation for weakness in the stock.
Fund Ownership Diverges as Short Sellers Favor BROS
Insider Monkey recorded 53 hedge fund holders in Dutch Bros in Q2, up from 50 in Q1. Starbucks had 64 holders, compared with 65 previously. As of September 15, approximately 16.41 million Dutch Bros shares were sold short. Providers using broader float estimates placed that at roughly 13% – 15%, compared with approximately 3.5% for Starbucks. Dutch Bros had substantially heavier short positioning relative to its float, although the exact percentage depends on the provider’s calculation.
Cramer sees a starting point in Dutch Bros Inc., but his suggested purchases at progressively lower prices acknowledge that the selling may continue. Dutch Bros is still adding shops and customers, while Starbucks Corporation is showing a traffic recovery of its own. With their forward earnings multiples now close, the comparison increasingly rests on how much profitable growth each can deliver.
While we acknowledge the risk and potential of BROS and SBUX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BROS and SBUX that has 10,000% upside potential, check out our report about this cheapest AI stock.
READ NEXT: Jim Cramer Is Staying Away From NIKE (NKE) Stock After Losing Money and Jim Cramer Calls Reformation (REF) an Intriguing Growth Story but Calls It “Speculative”.
Hedge Fund Resource Center