Dutch Bros Sees Unusual Options Activity After Impressive Earnings. Time to Buy?

On Thursday, President Trump was busy ratcheting his scorched earth tactics up on his tariff strategy. By April 2, we will hear if we will reciprocate tariffs on countries that have in place tariffs on their American imports, he suggested his economic team would study.

Changes to trade on Thursday meant that despite the gains, the tit for tat approach will likely continue to create uncertainty in the markets. He stated that if the EU followed America’s fiscal path, ‘five tariffs would mean nothing’, though he would be ‘very happy to consider reciprocal tariffs country by country’, and because those nations ‘have value added taxes, that’s far more punitive than a tariff.’ It means countries such as Canada, UK, etc.

As a Canadian, I’ve come to think that our VAT is an excellent revenue generator because it taxes consumption. Groceries that come with exemptions ensure that the low-income earners aren’t particularly targeted. CPA Canada tells us that the GST/HST is one of the least economically harmful taxes.

But I digress.

On Wednesday after the close, Dutch Bros (BROS) delivered Boffo Q4 2024 results. That means the shares of the Oregon coffee chain jumped 29% on Monday. In the past 52 weeks, they are up 203% and up 59% through 2025.

Look out, Starbucks (SBUX).

Also, yesterday saw such absurd options activity in the company’s stock that it was 26th out of 1,229. And only after the coffee chain is on the road to becoming profitable once again, even with the gains over the year, might it be time to buy.

Have an excellent weekend!

Dutch Bros’ Pathway to Profitability

The best news for long of its stock over the past few years is that the coffee chain has clocked in its second consecutive annual GAAP net profit of $66.5 million in 2024, 565% higher than in 2023. It is at the midpoint of its guidance with $1.57 billion of revenue in 2025, 23% higher than in 2024.

Adjusted EBITDA was $230.3 million (18% margin) versus $158.9 million in a year ago (23% margin) and up 44%. It has 2025 adjusted EBITDA on target to grow 17% to $270 million.

With respect to the trade war and its impact on wallets, it’s tough to look ahead 10 months. These projections seem conservative when given 2024 results, so dialing them down at this point makes sense.

It reported its first back-to-back years of profit after earning no money in 2019 and 2020, suffering losses in 2021 and 2022, though it managed to make a bit of money on its motorcycle mod operation during last year’s holiday season.

Despite a possible final bump in the road, Dutch Bros stock should be able to double by the end of 2029, but with volatility mixed in.

About the Nosebleed Valuation

BROS stock is trading at 49.1 times 2029 EPS estimate. That’s five years from now. Excessive valuation can be made into a bearish argument.

This is almost exactly the same kind of multiple as last saw the stock on this multiple (adjusted for COVID), that was back in 2006, almost 20 years ago. With a 7%+ net margin, Starbucks increased its annual revenue by 22% in 2006.

Without much spinning, I would be concerned about what ticket and transaction contributions to system-wide same shop sales could mean. Its system-wide same shop sales grew by 5.3%, or 250 basis points higher than 2023.

Transactions were down, but tiny, 0.1 percent, and the average ticket went up 5.4 percent. That’s still a better performance than the 4.5% decline in 2023, but I’m sure investors cannot expect strong growth in the average ticket over the next five years.

Both numbers will retire if Trump’s trade war pushes the U.S. into recession, which will diminish revenue and earnings growth.

It’s not what I am stating will occur; I’m merely mentioning this could happen. BROS stock is at its “perfect” valuation.

The Options Play for Dutch Bros Bulls

Most of Thursday’s trading had two unusually active call options, I said in the intro. The March 21 $90 call had the 24th highest Vol/OI ratio at 24.88.

The March 21 $90 strike is 8% OTM, and the Feb 21 $80 strike is 4% ITM.

There are three reasons why the $90 strike is the better bet at first glance.

Firstly, that’s 2.9% of the share price. The second point is that it expires in 36 days, 4.5x the time to expiration at the $80 strike. Finally,

If it rises another $7.34 ($2.45 ask price / delta 0.33371) or 8.8% it can be worth twice the cost of the trade. So, BROS is up 41% in the past month, and thus it is possible. Its ITM probability is 29.79%.

With a $4.80 ask price, 5.7% of Dutch Bros’ share price, the $80 strike is ITM. However, that’s a reasonable outlay as it has to appreciate by just $1.26 (1.5%) to be ahead of the game by expiration.

Still, according to the delta of 0.75089, you wouldn’t double your money in this case if you sell before the next Friday, since its shares must appreciate by $6.39 (7.7%) for you to get the opportunity to bail.

Dutch Bros stock has traded in the $80 range, if not closer, last time it did when it went public in 2021, at the early stage of IPO fever.

As I said in the long run the stock should double, but in the short run, who knows, maybe it’ll go into the 70s as people would be saying that.

Therefore, I would select the $90 strike. It offers a better risk/reward.