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JP Morgan downgrades Krispy Kreme to Underweight from Neutral.
ByAinvest
Wednesday, Aug 27, 2025 8:32 am ET1min read
JP Morgan downgrades Krispy Kreme to Underweight from Neutral.
Shares of Krispy Kreme (DNUT) have been hit hard following a downgrade from JP Morgan, which moved the stock to "underweight" from "neutral" on Wednesday. The move was based on concerns about the execution risks associated with the company's proposed turnaround plan [2].The brokerage cited declining business trends and the duration risk associated with refranchising multiple international assets as reasons for the downgrade. JPMorgan did not provide a new price target for the stock. The stock has significantly underperformed since its July 2021 IPO at $17, currently trading around $3.73 [2].
Krispy Kreme reported a wider-than-expected quarterly loss earlier this month and announced a turnaround plan focusing on re-franchising and driving return on invested capital. The company's average rating among 11 brokerages is "hold," with a median price target of $5.27 [1]. Despite the challenges, revenue slightly exceeded expectations in the second quarter, reaching $379.8 million compared to the anticipated $378.66 million.
The company is also undergoing a strategic shift following the termination of its partnership with McDonald’s. Morgan Stanley has reiterated its Underweight rating on Krispy Kreme, maintaining a price target of $2.50. Krispy Kreme was free cash flow negative in the second quarter, with proceeds from Insomnia Cookies preventing greater borrowing [2].
The downgrade reflects the ongoing challenges and strategic adjustments facing Krispy Kreme. The company's net leverage is approximately 8.5x (including structured payables) or about 7.5x as reported, with a current market cap of approximately $650 million and over $1 billion in net debt. Only five insiders hold approximately 48% of the company, with previous take-private investor JAB controlling about 43% [2].
References:
[1] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3UJ0H3:0-krispy-kreme-down-j-p-morgan-downgrades-to-underweight/
[2] https://www.investing.com/news/analyst-ratings/jpmorgan-downgrades-krispy-kreme-stock-to-underweight-on-turnaround-risks-93CH-4211921
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