Following the release of its first-quarter results on Thursday morning, Krispy Kreme’s stock experienced a significant decline. On Friday, analysts also showed disapproval, leading to further erosion with the stock declining over 16%, while the S&P 500 remained nearly unchanged.
Before the market opened, Evercore ISI analyst David Palmer revised his price target for Krispy Kreme to $3 per share, down from $9. Despite this adjustment, he maintained an in-line (hold) recommendation. Palmer cited issues such as a paused deal with McDonald’s and weakness in the U.S. retail sector, from which Krispy Kreme derives about 30% of its revenue, as concerning factors.
Citigroup also downgraded its expectations, with analyst Jon Tower lowering his fair value assessment for the stock to $3.60 per share, from a previous target of $4.75. Like Palmer, Tower retained a neutral recommendation.
The food industry faces challenges due to consumer sentiment and trends, with no current trends benefiting Krispy Kreme. The situation with McDonald’s is particularly discouraging, making investor caution understandable.
Citigroup is an advertising partner of Motley Fool Money. Eric Volkman holds no positions in the mentioned stocks, and The Motley Fool has no positions in them either, as per its disclosure policy.
