Yahoo Finance Ozempic Threats No Match for Krispy Kreme, Truist Says
(Bloomberg) -- Americans love their doughnuts too much to give them up forever, even in spite of the recent boom in weight-loss drugs, says one Wall Street fan of Krispy Kreme Inc.
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Truist Securities upgraded their recommendation on Krispy Kreme to buy from hold, reversing their October downgrade on the stock. The overhang from the drugs known as GLP-1s “is already here,” and fully reflected in the stock’s current valuation, analysts led by Bill Chappell said.
“Yes, we want to eat healthy, but we like our sweets,” Chappell wrote in a note dated Monday. Last year’s Krispy Kreme downgrade “was due to the belief that the GLP-1 overhang on snack food companies would last for some time and we believe this thesis has largely played out.”
As people tend to buy doughnuts by the dozen, Krispy Kreme is more “sheltered” compared to other areas in the US indulgent snack category, he added. “Don’t be the person who brings a vegetable platter to a 9-year-old birthday party or office gathering.”
Even if the category were to shrink, Chappell said the company had “more than enough opportunity to expand its share of the pie,” and saw potential for it to post steady mid-single-digit to high-single-digit growth over the next few years.
Shares in Krispy Kreme rose 6.5%, the most in about two months, to $11.32. Chappell raised his 12-month price target on the stock to $15 from $13, seeing around 41% upside to the stock from Friday’s close of $10.63. Shares had declined some 17% in the span between the Truist downgrade and upgrade. Krispy Kreme now has six buy recommendations, three holds and zero sells among analysts tracked by Bloomberg, who are the most bullish they’ve been on the stock since 2021.
Still, makers of sugary snacks are facing an uncertain future amid the boom in weight-loss drugs which analysts think will only grow. Goldman Sachs expects the global market for GLP-1 drugs to reach $130 billion by 2030.
GLP-1s were not the only reason for the upgrade. Truist’s Chappell said the potential of Krispy Kreme’s new partnership with McDonald’s Corp. — the announcement of which triggered a record surge in the stock — was being undervalued by investors. A nationwide rollout is expected by the end of 2026.
As a result of the partnership, Chappell said Krispy Kreme was finally a “true national brand.” He compared the nationwide rollout of the company’s doughnuts at McDonald’s to Chick-fil-A Inc., a “beloved” product that had historically been available in certain parts of the country before expanding availability.
“Many consumers and retailers view it as a ‘Southern brand’ despite its presence in 41 states,” Chappell said. “Not only does this enable the company to execute national marketing and advertising campaigns, but Krispy Kreme now also can be viewed as a national brand by national grocery and mass merchandise stores.”
--With assistance from Bre Bradham.
(Updates shares in sixth paragraph and first chart for market close.)
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