Buy Rating for Krispy Kreme Amidst Transformative McDonald’s Partnership and Expansion Forecast

Piper Sandler analyst Brian Mullan upgraded the rating on Krispy Kreme (DNUT – Research Report) to a Buy today, setting a price target of $20.00.

Brian Mullan has given his Buy rating due to a combination of factors that indicate a positive outlook for Krispy Kreme’s business. One significant element is the newly announced national partnership with McDonald’s, which Mullan believes could be a transformative development for the company. This partnership is expected to considerably enhance Krispy Kreme’s visibility and reach, potentially leading to a positive shift in the company’s narrative. Mullan also notes that the stock’s performance has been challenging since the initial public offering, but he anticipates that this new phase in the company’s growth could lead to substantial improvements.

In support of his Buy rating, Mullan outlines several key considerations in his report. These include a detailed forecast of the expansion in Krispy Kreme’s Point of Access (POA) growth in the United States, with an emphasis on the expected influence of the McDonald’s partnership on the company’s distribution footprint. Additionally, he has incorporated these projections into his financial estimates, anticipating a significant increase in Krispy Kreme’s U.S. segment’s Direct-to-Consumer (DFD) doors over the next few years. Mullan’s price target of $20 reflects an estimated 40% upside from current levels, which he deems as a conservative base case scenario. The report also delves into Krispy Kreme’s leverage and liquidity positions, cash flow history, and the potential financial impact of selling its Insomnia business, all of which contribute to his optimistic outlook for the company’s stock.

Based on the recent corporate insider activity of 32 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of DNUT in relation to earlier this year.

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Krispy Kreme (DNUT) Company Description:

Krispy Kreme Inc is a sweet treat brand. It is an omnichannel business operating through a network of doughnut shops, partnerships with leading retailers, and a growing e-Commerce and delivery business. It earns maximum revenues from the company shops, branded sweet treat line, and DFD; followed by mix and equipment revenue from franchisees; and franchise royalties, and others.