On Tuesday, HSBC made a bold move by upgrading Krispy Kreme, the popular doughnut maker, to a buy rating from hold. The bank maintained its target price of $14, suggesting a potential upside of over 30% from the previous day’s closing price. Despite Krispy Kreme’s stock being down by 29% since the beginning of the year, analyst Sorabh Daga remains optimistic. Daga pointed out the recent sale of the majority stake in Insomnia Cookies as a positive catalyst for the company. He also highlighted the strategic partnership with McDonald’s as a promising development for Krispy Kreme’s future growth.
Looking at the bigger picture, Daga acknowledged that Krispy Kreme has faced some challenges this year, with the stock pulling back by 26% year-to-date. However, with the new partnership with McDonald’s and the potential debt reduction, the company’s operating outlook has improved significantly. Daga emphasized the importance of simplifying the business and strengthening the core hub & spoke model. The sale of the stake in Insomnia Cookies, expected to yield double the acquisition cost from 2018, will further enhance Krispy Kreme’s financial position and margins.
In a separate move, Morgan Stanley decided to upgrade Skechers, a prominent shoe company, to overweight from equal weight. The bank also raised its price target to $80 from $60, indicating a potential 24.5% upside from the previous day’s closing price. Despite Skechers’ modest 3% year-to-date gain, the analysts at Morgan Stanley see significant potential for the company to outperform the broader market in the near term.
The rationale behind Morgan Stanley’s decision stems from several factors. Firstly, positive indicators from the bank’s proprietary research, such as the 2024 global sportswear survey and channel checks, have bolstered confidence in Skechers’ future performance. Secondly, the analysts remain optimistic about the potential for positive earnings per share (EPS) revisions in the near to medium term. Lastly, the bank sees room for a valuation re-rating as Skechers’ higher profitability profile and improved marketplace positioning are recognized and appreciated by investors.
Analyst calls and Wall Street chatter play a crucial role in shaping investors’ perceptions and decisions regarding specific stocks. The upgrades of Krispy Kreme and Skechers by HSBC and Morgan Stanley, respectively, indicate a positive outlook for these companies in the eyes of market experts. While Krispy Kreme’s strategic moves and partnerships are expected to drive growth and enhance profitability, Skechers’ improving fundamentals and market positioning are seen as favorable factors for potential stock price appreciation.
Investors should consider these analyst calls as part of their comprehensive research and analysis when evaluating investment opportunities. It is essential to weigh the insights provided by experts against one’s own financial goals and risk tolerance to make informed and prudent investment decisions in the ever-changing landscape of the stock market.