BofA Securities initiates coverage on Karat Packaging with Neutral rating and $28 PT.

BofA Securities initiates coverage on Karat Packaging with Neutral rating and $28 PT.

BofA Securities has started coverage on Karat Packaging Inc. (KRT) with a Neutral rating and a $28 price target. The investment bank appreciates the company's transition from manufacturing to distribution but considers the stock fairly valued at current levels [1].

Karat Packaging, a foodservice packaging supplier, has seen solid volumes and positive trends, but the sector faces macroeconomic risks. The firm likes Karat's focus on distribution, which has been bolstered by the recent establishment of a new distribution center near its Chino headquarters. However, the stock is viewed as fairly valued by BofA Securities [1].

In the second quarter of 2025, Karat Packaging reported record performance, with a 13% increase in sales volume, 10% growth in net sales, and 20% growth in net income year-over-year. The company's CEO, Alan Yu, highlighted the company's diversification efforts and cost management initiatives, such as a $1 million savings in online shipping and marketing [2].

Looking ahead, Karat Packaging expects net sales for the third quarter to increase by approximately 9% to 10% over the prior year quarter. The company also expects its gross margin for the third quarter to be in the low to mid-30s, with an adjusted EBITDA margin of 10% to 12%. However, the company acknowledges significant foreign currency headwinds and higher import duty costs from recent tariffs as ongoing business risks [2].

BofA Securities notes that while it appreciates Karat Packaging’s business approach, the firm considers the stock fairly valued at current levels. The company supplies packaging, utensils, and other products to the foodservice industry and maintains strong financial metrics, with a notable 6.84% dividend yield and liquid assets exceeding short-term obligations [3].

References:
[1] https://www.tipranks.com/news/the-fly/bofa-starts-karat-packaging-with-a-neutral-thefly
[2] https://seekingalpha.com/news/4482324-karat-packaging-outlines-9-percentminus-10-percent-q3-net-sales-growth-target-while-expanding
[3] https://www.investing.com/news/analyst-ratings/karat-packaging-stock-initiated-at-neutral-by-bofa-with-28-target-93CH-4187846