JPMorgan analysts downgraded shares of Krispy Kreme (DNUT) to Neutral from Overweight on Monday, maintaining a $13 per share price target on the stock.
Analysts at the firm said the downgrade follows a deeper dive into the company following its earnings release and "in-market time" with the company's CEO and CFO.
"With newly appointed CEO Josh Charlesworth now in the seat, after joining the company in 2017, the stated 2027 internal goal is to become the 'world's most loved sweet treat' brand," the analysts explained. However, they noted that DNUT's execution "has not always been consistent in terms of every package containing product made in the past 24 hours, which is actually an issue as the 'Krispy Kreme perfection' famously fades by the hour/day."
The analysts said the firm "will characterize this as an opportunity going forward."
The investment bank's time with DNUT management reminded them that Krispy Kreme is a bigger brand than it is as a company. "But, what Krispy Kreme has is something that is difficult for money to recreate -authenticity of a loved product," the analysts added.
"We value DNUT at 6.5% FCF yield on F26 FCF of $114m, discounted at 10%. We now add ~1/3 of global DNUT system Ebitda to include the DFD rollout to half of MCD's US system over time. This keeps our Dec-24 target at $13 per share intact and drives our downgrade to Neutral," the analysts concluded.
DNUT shares are down around 1.85% premarket.