Keith shorted DNKN in the Hedgeye Virtual Portfolio this afternoon as the stock is overbought from an immediate term TRADE perspective. The TRADE range is now $25.98-$27.96.
We continue to believe that this stock is overvalued. As we wrote on 8/22, and it remains true today, investors buying DNKN are paying a steep premium to SBUX, MCD, and YUM, from a valuation perspective. SBUX is also a richly-valued stock but we believe a proven track record of growth and exposure to higher growth global markets warrants a high multiple. DNKN, on the other hand, is largely focusing its growth on the domestic market. If our macro view of slower economic growth in the U.S. than in China and other emerging markets is correct, DNKN’s valuation premium (of 36%, using EV/EBITDA NTM) to SBUX is likely unsustainable.
For a copy of our Black Book on DNKN outlining our comprehensive thesis on the stock, please email firstname.lastname@example.org.