A temporary or a long pullback for tech stocks?

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Tech stocks lost some of their steam yesterday, as several big technology companies had some worrying signs for their China business. Apple’s iPhone sales plunged by 24% in China. Advanced Micro Devices hit a roadblock in selling AI chips to the US rival, while Tesla’s China shipments slowed. These show how China’s economic woes are starting to hit US companies. GitLab also fell by 21% after issuing a subpar outlook for the full year. Intel and Salesforce also fell by more than 5% each. They came at the time when tech companies are trading at sky-high valuations. Investors are starting to wonder if they can actually live up to the expectations, potentially leading to the recent decline. - “Trees don’t grow to the sky,” said Kenny Polcari at SlateStone Wealth. “What is starting to concern some investors is whether or not some of these tech companies that have gotten stretched can in fact live up to the ‘lofty valuations’ that investors have placed on them.” Kenny Polcari at SlateStone Wealth (Photo: Fox Business) What’s more, US service sector cooled in February due to falling employment. The Institute for Supply Management’s composite gauge of services fell to 52.6, so it still indicates an expansion (since it is above the 50 level). However, orders index and business activity index rose for the month. (Source: Bloomberg) At the same time, Bitcoin soared to hit a new all-time high yesterday. Wall Street often views it as a gauge of how speculative investors feel. More investors might glance over Bitcoin to see if the rally can hold. Fed Chair Jerome Powell will speak today and Thursday. Initial jobless claims will be out on Thursday. And finally, nonfarm payrolls and unemployment will report on Friday. Top Growth Stock To Buy Right Now There is an unusual restaurant in Oregon that fostered a cult-like following. Drive-thru lanes are nearly always jam-packed – far longer than McDonald’s. They were everywhere in popular plazas. And here are two unique things about this restaurant: (1) the restaurant is tiny, and (2) an employee would walk outside and take orders from each car. This is a brilliant idea. McDonald’s would have you order through a machine. You drive to the next window and pay for your food. Finally, you drive to the final window to pick up your orders. This restaurant is different. Its name is Dutch Bros. Today’s Stock Pick: Dutch Bros Inc. ([BROS]( A Dutch Bros employee (a “runner”) would walk outside and take orders from each car through its tablet. As a customer, you’d give your order to a real human while inside your car. You pay for the order to the same person. And finally, you drive up to the window to pick up your order. This type of human connection makes Dutch Bros immensely popular. In fact, Dutch Bros makes more money per restaurant than these restaurants: - Starbucks ($0.9m) - Subway ($0.49m) - Wendy’s ($1.8m) - Domino’s ($1.3m) - Pizza Hut ($0.98m) - Wingstop ($1.46m) - Burger King ($1.39m) - Taco Bell ($1.6m) Dutch Bros makes $1.9 million per unit which is almost two times more than Starbucks – the ultimate beverage-focused company: (Source: Dutch Bros) The beauty of focus: For now, they don’t sell food. Rather, they focus on beverages made with 10 ingredients or less. Their operations are so simple. They don’t have any lobby. They chose to focus on drive-thru only, which is unheard of in the restaurant world. (Photo: LoopNet) In other words, they eliminated the frills and focused on what matters for customers. Dutch Bros is in its infant stages, in terms of expansion. They operate in 14 states, and most states are still early in reaching the saturation point. Oregon (its founding state) has 150+ restaurants. Texas, Arizona, Nevada, and Colorado still have under 100 restaurants. And of course, we have all other 36 states that Dutch Bros hasn’t entered. In fact, its total shop count exploded from 572 in the first quarter of 2022 to 831 by the end of 2023. In fact, 2023 saw a huge year of growth for shops count: (Source: Dutch Bros) Listen, the growth opportunity is endless. Dutch Bros named its mission, “Open New Shops Wherever People Want Great Beverages.” Well, guess where people want great beverages? Everywhere. We’ve got existing states that are far from hitting a saturation point. We have 36 more states to go. And heck, we have international markets, as well. So far, new states show that its popularity spreads all the way from Oregon to Texas. In fact, its average unit volume in new stores exceeded the company’s average: - “Numbers have shown the brand translates well across regions … In fact, our average unit volume in the most recent states we entered are well above our system average, and that is in spite of very little marketing in those markets,” said CEO Joth Ricci. Here’s the incredible thing. Dutch Bros only spent 2% of total sales on marketing, but about 77% of people in Dutch Bros’ existing markets know the brand: - “Word-of-mouth advocacy for our customers has been among the strongest drivers of brand awareness… Seventy-seven percent of people surveyed in our existing markets were aware of Dutch Bros, and yet marketing spend represented only 2% of total systemwide sales last year,” added CEO Joth Ricci. Should you be worried about Starbucks? Dutch Bros does not go fully head-to-head with Starbucks. Dutch Bros is known for its coffee, but it also offers popular drinks like its signature energy drink called Blue Rebel. Here’s the beverage breakdown by sales: - Coffee/Cold Brew: 48% - Blue Rebel (energy drink): 23% - Tea/Lemonade: 10% - Frost/Smoothie: 6% - Coca/Chai: 7% - Other: 6% So, Dutch Bros is far more than just a coffee shop. It’s a beverage restaurant. Plus, Dutch Bros has competed successfully alongside Starbucks in its home turf of Northwest. Dutch Bros is trading at an expensive valuation. Wall Street recognizes its immense potential since its P/S is about six times. Yes, that’s expensive. But, let me paint you a picture of the future. The goal is to achieve 4,000 locations. Its average unit per volume (sales per location) is about $2 million. So, let’s multiply the number. With 4,000 locations at $2m per restaurant, the company will achieve $8 billion in revenue. Now, hold on to the number of $8 billion in revenue. Let’s look at the market cap. Dutch Bros has a market cap of about $5.3 billion. Starbucks is trading at a multiple of 2.86x market cap to revenue. - Formula: Starbucks has a market cap of about $103 billion and a FY 2023 revenue of $36 billion. You divide the number. You get 2.86x multiple. Using the same 2.86x multiple, Dutch Bros’ market cap would add up to $23 billion. How? You multiply $8 billion revenue by Starbucks’ 2.86x multiple. Well, my dear reader. That implies 4.33 times higher market cap than Dutch Bros’ current cap. The long-term upside is simply too lucrative to haggle about a company being somewhat pricey in the short term, don’t you agree? This company looks like a screaming buy. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](