What happened

Shares of Dutch Bros (BROS -4.12%) sank as much as 22% this week, according to data from S&P Global Market Intelligence. The drive-thru coffee and drinks chain posted strong growth in the first quarter, but it was well below analyst expectations. Shares of Dutch Bros closed down 20.4% this week and are now down 40% since going public in 2021.

So what

In the first quarter, Dutch Bros revenue grew 30% year over year to $197.3 million after the company opened 45 new shops around the country. This fell well below analyst expectations of $208 million in revenue in the period, which sent shares of Dutch Bros down in the days following the report.

Investors were likely disappointed in Dutch Bros' same-store sales growth, which actually declined 2% from the prior year. However, for all of 2023, management expects the business to grow same-store sales in the low single digits even when compared to major price increases in 2022. Tracking same-store sales will be important in the coming quarters to analyze if traffic and spending at Dutch Bros stores are holding up.

Dutch Bros is not profitable, posting a net loss of $9.4 million in Q1. These losses are improving (net loss was $16.3 million last year), but there still is a lot of progress to be made before the company starts generating positive earnings for shareholders.

Now what

The good news is that Dutch Bros still has a long runway to grow its operations. The company has locations mainly on the West Coast but is seeing comparable unit economics in the locations it is opening up farther east. If this holds true throughout the country, the company could be on a path to growing its revenue at a double-digit rate for many years to come. For 2023, management is guiding for $1 billion in sales at the high end of its guidance. Five to 10 years from now, the company could be doing $3 billion to $4 billion in revenue a year if it succeeds with this expansion strategy, which would likely bode well for shareholders. Of course, it has to prove it can turn this revenue into consistent profitability and cash flow, too.

If you believe Dutch Bros can dominate the country with its drive-thru coffee shops and eventually turn a profit, now could be a good time to buy some shares with the stock down so much after these earnings.