Krispy Kreme Shares Sink on JPMorgan Downgrade to ‘Underweight’

Krispy Kreme (DNUT) shares are dropping in morning trading Wednesday after JPMorgan downgraded the doughnut maker to an “underweight,” citing challenges to its turnaround plan.

The analysts previously had a “neutral” call with no price target for the shares, which they said had “vastly underperformed” since the doughnut firm went public in July 2021 at $17 each. 

Krispy Kreme shares, which entered Wednesday down more than 60% so far this year to $3.73 each, are tumbling about 8% in morning trading. The company announced a turnaround plan in July, after it ended its year-old partnership with McDonald’s (MCD) that it said it was unable to scale up profitably.

“After reviewing the proposed turnaround plan, we believe the execution risk—specifically the duration risk to refranchise multiple international assets—remains high as underlying business trends continue to decline,” the analysts wrote. 

Krispy Kreme’s profitability was also hit, the analysts said, by the high costs linked to its McDonald’s tie-up: The company had initially intended to make its doughnuts available in all of the fast food firm’s locations by the end of 2026.

“This disruption led to the company being in survivor mode, including the sale of various store assets around the world and an attempted shift to 3P [third-party] delivery to reduce costs and operational complexity,” the analysts wrote. They said that “nearly all” of the doughnuts’ appeal is in being eaten when freshly made.