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Krispy Kreme (NASDAQ:DNUT) fell in early trading on Monday after JPMorgan downgraded the restaurant stock to a Neutral rating from a prior stance of Overweight. The firm thinks the 25% year-to-date rally for Krispy Kreme (DNUT) has already baked in much of the upside potential.
Analyst John Ivankoe and team view Krispy Kreme (DNUT) as a large and widely admired brand, and believe increased accessibility will allow the company to more fully participate in the $650B global indulgence market. However, the JPMorgan view is that execution has not always been consistent in terms of every Krispy Kreme package containing product made in the past 24 hours, which is said to actually be a real issue as the “Krispy Kreme perfection” perception fades by the day.
“We cannot help but question whether the ultimate opportunity of Krispy Kreme resides within a sub-scale NC-based corporation. The much anticipated MCD rollout seems to be a near term event with portion of incremental capex allocated to the logistics of this evolving partnership.”
JPMorgan has a price target of $13 on Krispy Kreme (DNUT).
