S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Dell, NetApp rise; Ginkgo Bioworks, New York Community Bancorp fall, Friday, 3/1/2024
How major US stock indexes fared Friday, 3/1/2024
Critical asset just had biggest fall on record (Ad)
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
Question of whether Nebraska public money can go to private schools still set for November ballot
Critical asset just had biggest fall on record (Ad)
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
Peace, music and memories: As the 1960s fade, historians scramble to capture Woodstock's voices
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Dell, NetApp rise; Ginkgo Bioworks, New York Community Bancorp fall, Friday, 3/1/2024
How major US stock indexes fared Friday, 3/1/2024
Critical asset just had biggest fall on record (Ad)
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
Question of whether Nebraska public money can go to private schools still set for November ballot
Critical asset just had biggest fall on record (Ad)
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
Peace, music and memories: As the 1960s fade, historians scramble to capture Woodstock's voices
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Dell, NetApp rise; Ginkgo Bioworks, New York Community Bancorp fall, Friday, 3/1/2024
How major US stock indexes fared Friday, 3/1/2024
Critical asset just had biggest fall on record (Ad)
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
Question of whether Nebraska public money can go to private schools still set for November ballot
Critical asset just had biggest fall on record (Ad)
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
Peace, music and memories: As the 1960s fade, historians scramble to capture Woodstock's voices
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Dell, NetApp rise; Ginkgo Bioworks, New York Community Bancorp fall, Friday, 3/1/2024
How major US stock indexes fared Friday, 3/1/2024
Critical asset just had biggest fall on record (Ad)
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
Question of whether Nebraska public money can go to private schools still set for November ballot
Critical asset just had biggest fall on record (Ad)
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
Peace, music and memories: As the 1960s fade, historians scramble to capture Woodstock's voices

Krispy Kreme Deal with McDonalds Could Be a Gamechanger

A Krispy Kreme Deal with McDonalds Could Be a Gamechanger

Key Points

  • Krispy Kreme has entered into a limited testing program with McDonalds to potentially carry its donuts within its 40,000 worldwide locations
  • It’s hub and spoke model focused on growing its points-of-access (POA) is the growth driver with a long-term goal of 50,000 POA from its 11,000 current POA
  • It’s asset-light Delivered Fresh Daily (DFD) donut cabinets and carts placed in high traffic retail locations is a key POA growth driver  
  • 5 stocks we like better than Krispy Kreme

Krispy Kreme NASDAQ: DNUT is an iconic brand that’s been around since 1937 selling more than 1.3 billion donuts yearly throughout 30 countries worldwide. Older traders may remember the meme stock like a short squeeze propelling its shares into the triple digits under its old symbol KKD. The Company had since been acquired by private equity firm JAB holdings in 2016 for $1.35 billion. They spun it off again in 2021 under its current symbol in a $500 million IPO. The Company has expanded its line of products from donuts to ice cream, coffee, cookies, shakes,  snacks, and various fresh baked goods. The Company competes with privately acquired Dunkin and loosely with Starbucks NASDAQ: SBUX. A potential deal with McDonalds NYSE: MCD could be a game-changer if the test program pans out well. The Company has been evolving its operating model and refining its growth strategy since its new CEO took over in 2016 and it’s finally hitting the tipping point.

The Transformation of Krispy Kreme

The “new” Krispy Kreme transformation has been spearheaded by CEO Michael Tattersfield, former CEO of Einstein Bagels and Caribou Coffee. He has evolved the strategy from the legacy retail and wholesale distribution model focus to bolstering its direct-to-consumer (DTC), e-commerce and omnichannel sales funnels. The legacy strategy favored more franchised donut shops, long-shelf life doughnuts in grocery stores, and capital-heavy Hot Light Theatre Shops. The new Krispy Kreme has grown its omnichannel sales pipeline growing its asset-light fresh access points (FAB), focus on freshly made daily premium quality doughnuts, asset-light hub and spoke model and focusing on growing its Company owned shops.

A Krispy Kreme Deal with McDonalds Could Be a Gamechanger

Daily Cup-and-Handle Breakout Chart Formation

Krispy Kreme stock collapsed on Aug. 17 on its prior Q2 2022 earnings report as they not only missed EPS estimates but also lowered forward guidance for the rest of 2022. This formed a gap level between $13.86 to $13.51. The stock proceeded to fall further to a swing low of $11.25 before staging a rally ahead of Q2 earnings. The daily Bollinger Bands (BBs) formed tight compressions in the month of September as a rounding bottom was forming. By October, the selling pressure had subsided as the daily MSL finally triggered on the breakout through $12.52, where it had failed twice before The heavy volume helped to sustain the momentum and proceed higher towards the $15.59 multiple resistance and “lip” of the cup. If the stock rejects the “lip” and falls back down to hold the gap levels between $13.50 to $13.81, then it can proceed to attempt a cup and handle breakout upon bouncing back up through the $14.82 “lip” level with a heavy volume equivalent to the volume of the $12.52 breakout. If the pullback doesn’t hold the gap levels, then the remaining support levels sit at the $13.11, $12.52 MSL trigger, $11.25 swing low, and the $10.50 stinky 5s price level.


Access is the Growth Driver  

One of the biggest shortfalls for Krispy Kreme is the lack of nearby locations or access. It has just over 1,800 Krispy Kreme and Insomnia Cookies locations spread throughout 30 countries worldwide. Krispy Kreme has over 11,000 points of access (POA), which are locations you can purchase Krispy Kreme doughnuts from its more than 1,200 owned and franchised shops to 385 Hot Light theatres, 42 doughnut factories, and  9,000 delivered fresh daily (DFD) locations. DFDs are strategically placed cabinets, carts, food trucks, and placements in high traffic retail store locations. DFDs are the growth driver of FABs. Krispy Kreme’s goal is to grow to over 50,000 POA long-term in a universe of 1.3 million.

McDonald’s Test-Selling Program

Krispy Kreme doughnuts began a McDonald's restaurant test-selling program with its Original Glazed, chocolate iced with sprinkles, and raspberry-filled donuts in nine McDonald's locations in Louisville, KY. The outcome of the testing will determine if McDonalds will be another FAB with its over 40,000 locations. A joint statement was issued “McDonald’s is always looking for ways to give our fans more of what they crave, and we often conduct tests to inform future menu decisions. This small-scale test will help us understand how offering new bakery items like Krispy Kreme could impact operations in our restaurants.” Shares have climbed in anticipation of the test results. Investors recall how a McDonald’s approval can be a game-changer for its shares like Beyond Meat NASDAQ: BYND did when they approved a  McPlant co-branded burger rollout. More color on this is expected when Krispy Kreme reports its Q3 2022 earnings premarket on Nov. 15, 2022. Analysts expect $366.3 million in revenues and $0.05 EPS.

 

→ This is the #1 Stock to Buy for the AI Tidal Wave (From Chaikin Analytics) (Ad)

Should you invest $1,000 in Krispy Kreme right now?

Before you consider Krispy Kreme, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Krispy Kreme wasn't on the list.

While Krispy Kreme currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Beginners Guide To Retirement Stocks Cover

Click the link below and we'll send you MarketBeat's list of seven best retirement stocks and why they should be in your portfolio.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Krispy Kreme (DNUT)
2.8584 of 5 stars
$12.47-3.6%1.12%-56.68Hold$15.61
McDonald's (MCD)
4.9077 of 5 stars
$290.73-0.5%2.30%25.13Moderate Buy$320.10
Starbucks (SBUX)
4.8749 of 5 stars
$93.16-1.8%2.45%24.91Hold$111.43
Beyond Meat (BYND)
1.1383 of 5 stars
$9.77-8.6%N/A-1.86Strong Sell$6.67
Compare These Stocks  Add These Stocks to My Watchlist 

Jea Yu

About Jea Yu

  • JeaYu21@gmail.com

Contributing Author

Trading Strategies

Experience

Jea Yu has been a contributing writer for MarketBeat since 2018.

Areas of Expertise

Equities, options, ETFs and futures; fundamental, qualitative, quantitative and technical analysis and pattern identification; active and swing trading; trading systems and methodology development

Education

Bachelor of Arts, University of Maryland, College Park

Past Experience

U.S. equity markets trader, writer and analyst for over 25 years. Published four books by publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. Speaker at various expos and seminars and has been quoted and featured in USA Today, The Wall Street Journal, Traders Magazine, The Financial Times and various trade publications, including Stocks & Commodities, Active Trader and Online Investor.


Featured Articles and Offers

Search Headlines: