Wells Fargo has recently started monitoring Dutch Bros and Wingstop, two prominent quick-service food chains, assigning them a "buy" status. Analysts from the financial institution have identified Dutch Bros for its innovative approach and its potential for sustained growth. Wells Fargo has set its price target for the cafe chain's stock at $80, slightly lower than the $83 average compiled by Visible Alpha, but still 14% above its closing price on Tuesday.
Wells Fargo is one of several research groups that have evaluated Dutch Bros before its investor conference set for Thursday. The research places value on the company's plans to broaden its food range and mobile ordering, a move expected to cause a 10% increase in the average sales of each store over the coming year.
At present, about 90% of Dutch Bros’ business operates on a drive-through basis. This model often leads to forming long queues during rush hours, typically in the mornings and afternoons. However, the recently introduced mobile ordering is seen as a significant solution to improve drive-through efficiency.
In the last year, shares of Dutch Bros have more than doubled due to extensions into new markets and the opening of its 1,000th store.
Wingstop, on the other hand, has seen its shares decrease by about 40% within the same duration. Nonetheless, Wells Fargo perceives this decline as a potential investment opportunity due to its promising rate of growth. Despite being influenced by a lackluster 2025 outlook and weaker sales, analysts still see significant potential in the chicken wing chain.
Wells Fargo proposed a $270 price target for Wingstop - nearly 23% above Tuesday's closing price, but still below the estimated $321 target from Visible Alpha. The analysts recognized Wingstop's ability to operate efficiently when compared to other quick-service restaurants. They also noted that the company has been successful in acquiring market share through limited-time offers. Furthermore, the prospects for expansion, particularly on an international level, as another growth avenue for the company.