The meme craze is back with new stocks this time. Krispy Kreme is a new meme stock, up 40% in five days.
I am downgrading Krispy Kreme from 'buy' to a soft 'sell' due to worsening fundamentals and the end of the McDonald's partnership. Despite recent meme-stock rallies, long-term prospects look weak as revenue, profits, and cash flows are expected to decline further. The sale of Insomnia Cookies and high debt add uncertainty, while the stock only appears cheap based on outdated historical results.
The latest meme-stock frenzy shows that “market psychology and crowd behavior can sometimes matter more than the numbers,” says Capital.com analyst Daniela Sabin Hathorn
A match made in fast-food heaven ended this week, after high hopes and promising early results from Krispy Kreme's deal to sell doughnuts in McDonald's restaurants.
Krispy Kreme (DNUT) has a new top financial executive, as the struggling doughnut maker said that its current president of international operations Raphael Duvivier will take over as CFO next week.
Krispy Kreme's past growth was impressive but unprofitable, leading to heavy debt and a collapsing stock price. Management now has a credible turnaround plan: focus on core products, cut costs, shift to asset-light franchising, and reduce debt. Valuation has reset after the sell-off; current price offers 40-50% upside if the turnaround plan gains traction.
Examine the evolution of Krispy Kreme's (DNUT) overseas revenue trends and their effects on Wall Street's forecasts and the stock's prospects.
Krispy Kreme, Inc. (NASDAQ:DNUT ) Q1 2025 Results Conference Call May 8, 2025 8:30 AM ET Company Participants Alexandre Eldredge - Investor Relations Joshua Charlesworth - President & Chief Executive Officer Jeremiah Ashukian - EVP & Chief Financial Officer Conference Call Participants Rahul Krotthapalli - JPMorgan Daniel Guglielmo - Capital One Securities Isiah Austin - Bank of America Andrew Wolf - C.L. King Bill Chappell - Truist Securities Operator Hello, everyone, and thanks for standing by.
Krispy Kreme also pulled its full-year outlook due to "macroeconomic softness and the uncertainty around the McDonald's deployment schedule."
Shares of Krispy Kreme Inc. (NASDAQ: DNUT) plunged more than 28% on Thursday after the doughnut-and-coffee chain said it will no longer pay out its quarterly dividend, and that it was “reassessing” the deployment of its planned McDonald's rollout and fell short of earnings expectations, according to Bloomberg.
Krispy Kreme's shares have plummeted by over 60%, and despite the drop, the stock's valuation remains high at 79.7x Fwd P/E, raising solvency concerns. The partnership with McDonald's has underperformed, leading to a pause in expansion plans, which significantly impacted investor confidence and share prices. Krispy Kreme's financial health is precarious with nearly $1 billion in debt and a net leverage ratio of 6.1x, risking potential covenant breaches.
Krispy Kreme pushed out a lot of news today. Investors donut like what they see.