Investor response to Krispy Kreme's (DNUT) Q4 financial results and 2025 forecast this week was swift and extremely negative, but as bad as things have been, the stock likely still has some distance to go before finally finding a bottom, analysts at Morgan Stanley said in a new research note on Wednesday.

Krispy Kreme shares (DNUT) plunged this week, closing 22% lower on Tuesday and continued to lose ground on Wednesday. The steep declines suggest Wall Street may have already priced in all of the bad news ahead for the doughnut chain, although the Morgan Stanley analysts said the company may have difficulty meeting even those diminished expectations.

"We're thinking about broader demand indicators and how the company is going about targeting those," the analysts said. "Quite simply, many elements of the story continue to shift too much for our comfort," they said, cutting their rating for Krispy Kreme to underweight from equalweight previously and also halving their price target for the stock to $6 a share.

The new price target largely maintains Morgan Stanley's existing model using a multiple of 10 times the company's 2025 earnings before interest, taxes, depreciation and amortization, the analysts explained, adding other metrics such as per-share earnings or free cash flow likely will be too small to accurately reflects Krispy Kreme's share price.

The Morgan Stanley analysts also trimmed their 2025 revenue forecast for Krispy Kreme by nearly 9%, now expecting the company to generate around $1.58 billion in sales this year compared with their prior outlook expecting $1.8 billion. The company is looking for $1.55 billion to $1.65 billion for its 2025 sales.

Price: 6.58, Change: -0.56, Percent Change: -7.78