Truist analysts downgraded shares of Krispy Kreme (DNUT) to Hold from Buy, lowering the stock price target to $13 from $20 per share in a note Monday.
The analysts said that the GLP-1 overhang for Krispy Kreme is "here to stay."
"Our call is based on the belief the current GLP-1 overhang on packaged food stocks will not dissipate for 6-12 months, if not longer," they explained. "We believe the stocks will be stuck in a holding pattern at best with strong potential for additional multiple contraction as the initial impact of GLP-1 use becomes more apparent."
The analysts said that while they have no idea what the impact of GLP-1s will be on overall food consumption, they believe it is way too early in the cycle for anyone to have an accurate estimate, and that "is the problem."
They noted that similar to what happened over 15 years ago with the rise of Atkins diets, investors largely avoided companies impacted by a megatrend until the impact was fully evident in the respective results.
"Ironically, it would be better for DNUT and other food stocks if GLP-1 usage was already impacting 3Q23 results so investors could start to make forecasts of how it will impact the business in 2024 and 2025," the analysts said.
While the firm believes in the DNUT model, they "have a difficult time recommending the name at least until the GLP-1 wave has started to form."