Krispy Kreme stock rises on upgrade from Piper Sandler

Shares of Krispy Kreme (DNUT) are rising as Piper Sandler upgraded its rating on the company from Neutral to Overweight, raising its price target from $14 to $20 per share. The firm cited Krispy Kreme's new partnership with McDonald's (MCD) as the reason behind the upgrade, calling it a "game changer."

Yahoo Finance Anchors Brad Smith and Seana Smith break down the latest developments for Krispy Kreme and what they could mean for the company moving forward.

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Editor's note: This article was written by Nicholas Jacobino

Video transcript

BRAD SMITH: And we're also taking a look at shares of Krispy Kreme. Rallying in today's trade after Piper Sandler upped its rating on the stock from neutral to overweight and raised the price target to $20 per share. Analysts saying that the donut chain's partnership with McDonald's is a game-changer for the brand, setting the stage for major expansion of the brand in the U.S. over the next few years. You made fun of me. You all made fun of me here on set when I said this is huge for the company. This is massive for Krispy Kreme. The analyst says they tend to agree here.

SEANA SMITH: Oh, I think it's massive for Krispy Kreme. I don't know how massive it is for McDonald's.

BRAD SMITH: The McDonald's?

SEANA SMITH: I think that this is huge for Krispy Kreme, right? Getting into McDonald's locations obviously makes a lot of sense. But when I was reading this analyst note this morning, it was a little funny because he almost sounded a bit more optimistic than even you are--

BRAD SMITH: Yeah, he did.

SEANA SMITH: On Krispy Kreme. You mentioned that game changing line. That stuck out to me. He's also saying that things are starting to change in real-time and he really expects this narrative around Krispy Kreme that has struggled for some time to materially improve, a lot of that on the back of this McDonald's partnership.

I think the question, though, is what exactly the traffic is going to look like? What that uptake rate is going to look like? And whether or not people are actually going to be making more trips to McDonald's to see how big of a boost this will be to McDonald's bottom line not only for Krispy Kreme. But for Krispy Kreme, there's no argument. Obviously, this is a great news.

BRAD SMITH: Well, yeah, for Krispy Kreme and for the hit that we had seen that you were mentioning a moment ago and how investors were trying to evaluate this. I think there was the overhang and there are likely still is about what GLP wants, what Ozempic-- what all of the other weight loss drugs, especially for those who are diabetic or those who are just trying to, you know, take advantage of some of the new weight loss solutions out there and the testing that's come forward. I mean, at the end of the day, I think that's one of the overhangs that still exists. But for Krispy Kreme, for McDonald's, a solid tie-up. Better for Krispy Kreme though here. It's sweet.