Krispy Kreme Inc (NASDAQ:DNUT) has a distinctive and popular product offering and the ability to “leverage existing capacity to drive higher returns,” according to BofA Securities.
The Krispy Kreme Analyst: Sara Senatore initiated coverage of Krispy Kreme with a Buy rating and a price target of $23.
The Krispy Kreme Thesis: The company has the long-term opportunity to grow its access points in the US and Canada from around 3,750 currently to 8,000, Senatore said in the initiation note.
“Krispy Kreme can centralize production without compromising quality to a far greater extent than can other restaurants, a dynamic underpinning the ‘Hub and Spoke’ distribution network innovated in London and being deployed across the US and Canada system and markets globally,” the analyst wrote.
“In 2021, each of the US/Canada segment’s average 238 hubs supported about 21 fresh daily points of access generating about $3 mm [million] sales per hub. By contrast, the International segment’s 36 hubs each supported an average 73 access points or $8+ mm sales per hub, implying substantial opportunity for leverage going forward,” Senatore mentioned.
“E-com further leverages existing production (delivery incrementality is around 68%) at high margins (69% owned channels),” she added.
DNUT Price Action: Shares of Krispy Kreme had risen by 2.99% to $17.76 at the time of publication Tuesday.
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