JPMorgan downgrades Krispy Kreme, upgrades Dutch Bros.

Shares of Krispy Kreme and Dutch Bros. were on the move in early trading following recent analysts calls.

JPMorgan downgraded Krispy Kreme (DNUT) to Neutral from Outperform while maintaining a $13 price target, citing execution issues as a risk to the stock in the short-term.

The team was bullish on Dutch Bros. Coffee (BROS), upgrading the stock to Overweight on liquidity improvements.

Yahoo Finance’s Seana Smith and Brad Smith break down the recent analyst reports.

Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.

Video Transcript

SEANA SMITH: A tale of two food. Companies JP Morgan has opposing viewpoints for Krispy Kreme and Dutch Bros, downgrading Krispy Kreme to neutral on execution issues. But they lifted Dutch Bros to overweight, citing liquidity improvements.

When you take a look at their base case at least here for Dutch Bros, they're seeing that Dutch Bros now has strong available liquidity comprised of $150 million of cash. $350 million of availability under it, undrawn revolver. $200 million of undrawn delayed draw term loan here, all setting that up for returning free cash flow positive in 2027. So the outlook here for Dutch Bros is pretty optimistic.

Comparing that to Krispy Kreme, it looks like the biggest issue, at least my takeaway from this note, was the lack of consistency that they're saying they're seeing around Krispy Kreme delivered fresh daily business and some of the risk that that could then pose to the business going forward.

I don't know, you're a pretty loyal Krispy Kreme.

BRAD SMITH: I was.

SEANA SMITH: You've been there for a while there.

BRAD SMITH: Well, it was proximity driven. I lived directly across the street from a shopping center which housed a famed hot light and Krispy Kreme, and so I could not help but go without a couple of days or a week without going in there. Anyway, all that, the same. You love looking at the kind of convection line as it's coming down.

For all of these calls that we've seen come forward, a few things about the consumer, especially in that delivered fresh daily, it's really just the opportunity to get them in a few different capacities. And Krispy Kreme here, I think within what they've been able to do in that delivered fresh daily is to just grow the network that they're able to deliver into now.

This is also a company that's had a recent CEO transition as well here. So Tattersfield out and now ultimately seeing what that new head at Krispy Kreme does in order to continue to grow the network, ensure that the quality is not ultimately given up in that effort as well.

And then on the Dutch Bros side, that's just been interesting to track and what JP Morgan is saying about them saying they see significant changes in capital structure and shareholder base in the past few months. And that really kind of contributing to some of the update there that the bank or the firm had given for this coffee chain.

SEANA SMITH: And there's a new elf.

BRAD SMITH: New elf, there is.

SEANA SMITH: That's two. Three new elf donuts to celebrate 20 years since we first started talking about Will Ferrell and Buddy the elf. That's amazing.

BRAD SMITH: I think I've only seen the movie once.

SEANA SMITH: Really?

BRAD SMITH: Yeah, that's all I needed.