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Krispy Kreme Stock Singed on Truist Downgrade to Hold

Krispy Kreme shares slip Monday as a Truist analyst downgrades the doughnut chain and cuts his price target.

Krispy Kreme  (DNUT) - Get Krispy Kreme, Inc. Report was singed Monday after a Truist analyst downgraded the doughnut chain to hold from buy and slashed his price target to $15 from $21, one day before the company is scheduled to report third-quarter earnings.

Shares of the Winston-Salem, N.C., chain at last check were down 3.1% to $13.67.

Analyst Bill Chappell said in a research note that Krispy Kreme is still expected to post a "solid" result this week, according to the Fly.

But the analyst said his original recommendation of the stock was based on expectations of "consistent" double-digit revenue growth, which would enable Krispy Kreme to hold a growth-stock multiple. 

Chappell added that the labor shortage could result in mid-to-high-single-digit top-line growth, at least in 2022, which may revive investor skepticism about growth for the indulgent snack category.

Last month, HSBC analysts Sorabh Daga and Carlos Laboy downgraded Krispy Kreme to hold from buy and cut their target price to $14 from $25.

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The analysts said "the low operating margin profile for a capital-intensive business worries us as geographic expansion into an inflationary environment could lift [capital spending]."

In August, the 83-year old company reported second-quarter revenue of $349.2 million, a 43% increase from a year earlier. Earnings were 13 cents a share. 

Analysts were expecting earnings of 14 cents a share on revenue of $333.4 million.

Krispy Kreme went public in July and closed at $21 a share on its first day of trading, 24% above its initial public offering price of $17.

The chain is currently controlled by JAB Holding, the Luxembourg group that also owns the chains Panera Bread and Pret A Manger.

Krispy Kreme initially went public 21 years ago during the bubble and then declined. JAB Holding took Krispy Kreme private in a $1.35 billion deal in 2016.