Dunkin' Brands (Nasdaq: DNKN) must be wondering what's going on when the company that underwrote its initial public offering a mere two months ago is yelling, "Get out!" at the top of its lungs.
Investors must be wondering, too. The share price, which had risen 42% since the IPO, started the day by falling almost 5% on the "sell" rating.
Goldman Sachs (NYSE: GS), the fickle underwriter, opened the day with that downer rating, noting that Dunkin's core domestic business is "highly macro-sensitive against an uncertain economic backdrop." So what's changed? I don't remember the domestic macro-economic picture looking all that great two months ago, either, do you?
Three of Dunkin's other underwriters haven't helped much, either. Barclays (NYSE: BCS), Wells Fargo (NYSE: WFC), and Bank of America (NYSE: BAC) gave tepid "neutral" or "equal weight" scores to the company.
But valuation ...
Goldman said it liked Dunkin's global potential, as did Barclays. But both said, in essence, that the stock is overpriced compared to its competitors such as McDonald's (NYSE: MCD) and Starbucks (Nasdaq: SBUX).
|
Company |
P/E (trailing) |
|---|---|
| Dunkin' Brands | 38 |
| McDonald's | 18 |
| Starbucks | 28 |
... is in the eye of the beholder
But wait -- other Dunkin' underwriters have taken a totally different view of the company. JPMorgan Chase, the top underwriter of Dunkin's IPO, even gave it an "overweight" rating, saying "low-risk growth should sustain [its] premium multiple."
Dunkin's ambitious plan had been to increase the number of its stores to 15,000 over the next 20 years. However, Goldman estimates that the company would only be able to sustain another 3,200 stores, for a total of 10,000. By way of comparison, McDonald's has 14,000 domestic stores, and Starbucks has 10,900.
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