Shares of Dutch Bros (NYSE:BROS) stock are trading lower by about 10% after being named as “a new short idea” by independent research firm Hedgeye. Analyst Howard Penney believes that the company is inefficiently balancing unit growth and profitability, adding:

“The relentless focus on excessive unit growth and not balancing that with profitability can create long-term issues for the company (i.e., SHAK). We don’t see the company generating enough OCF to cover capital spending until FY2026 (and that might be a generous assumption).”

Penney also points out that Dutch Bros’ shop counts have doubled since 2019, which is a “significant” part of the company’s unprofitability aspect. Store growth has led to a decline in the last 12 months (LTM) accumulated unit value (AUV) for Q4.

Hedgeye Initiates BROS as a New Short Idea

The coffee chain reported its Q4 earnings earlier this week. Revenue totaled $201.8 million, up by 44.1% year over year (YOY) and beating the consensus estimate for $195.76 million. Adjusted earnings before interest, taxes, deductions and amortizations (EBITDA) was also a bright spot, coming in at $29.8 million, up 116% YOY, and beating the consensus estimate for $29.6 million.

Meanwhile, the company reported opening 30 new shops, 26 of which are company-operated, in 11 states. In all of 2022, Dutch Bros opened 133 new stores, or about one new store every 2.7 days. For 2023, the company has a goal of opening 150 new shops, which would satisfy the five-year goal of opening 800 shops by the end of the year.

However, guidance was a bit shaky compared to analyst estimates. Full-year revenue is forecasted to be between $950 million and $1 billion. At the midpoint, that comes out to be $975 million. Meanwhile, analysts were expecting $981 million. On top of that, Dutch Bros expects adjusted EBITDA of $125 million. That is way below the analyst estimate for $142 million.

Across the board, Wall Street analysts are bullish on BROS stock. The stock carries an average price target of $40.30 among 10 analysts with coverage. Earlier this month, Guggenheim initiated coverage with a “neutral” rating and a price target of $47. In addition, research firm Gordon Haskett maintained its “buy” rating and raised its price target to $46 from $43.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.