YB new stock pitches (Mon, Nov 11)

Krispy Kreme (DNUT) is undervalued compared to CPG peers, with a $15 price target by 2025. The company's hub-and-spoke model enables efficient distribution of its superior mass-produced donuts. A key catalyst is the McDonald's partnership, expanding to 12,000 locations over two years. The international business, representing 30% of revenue, is strong and growing. Management expects 20%+ EBIT margins and improving free cash flow conversion post-investment cycle. The company is rolling out to CostCo and aims to add 3,000 non-McDonald's doors. Risks include high capital expenditure and past accounting issues. The bull case involves successful McDonald's implementation and potential for additional QSR partnerships. With an improving FCF profile and deleveraging potential, the stock could rerate as the benefits of the hub-and-spoke model materialize. - link

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Nintendo (NTDOY) is poised for significant growth with the confirmed launch of the Switch 2 in the first half of 2025, likely in March. Recent global shipping data reveals mass production PCBs being shipped to Wuhan and Vietnam, signaling the start of production. The company's work-in-progress inventory has spiked dramatically, indicating a pre-release production run 10 times larger than previous Switch iterations. Based on these factors, the author predicts Switch 2 sales to exceed 30 million units in its first year, surpassing Nintendo's pandemic-era highs in both sales and operating profit. This aggressive production strategy suggests Nintendo's confidence in the Switch 2's market potential and sets the stage for a potentially record-breaking product launch.

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Serviceware SE (SJJ.F) is an enterprise service management software company trading at 1.1x EV/Sales with net cash comprising 30% of its market cap. The company's ITSM/ITFM recurring revenue, which accounts for 70% of total revenue, is growing at over 20%. Serviceware has turned EBIT positive with over 100% cash conversion and boasts blue-chip clients like Petrobras, Petronas, DSV, and Ikea. Management owns two-thirds of the company, which is expanding profitably via partners outside its DACH core market. The company's SaaS transition is nearly complete at 80%, with a strong AI offering boosting customer up-selling. Q3 2024 sales grew 18%, and the orderbook increased 43% to €79 million. With a market cap of €140 million and €32 million in net cash, Serviceware is projected to reach €10 million EBITDA in 2025, trading at 10x EV/EBITDA and 0.9x EV/Sales for FY25. The stock is cheap due to a prolonged SaaS transformation, struggles with international sales growth from 2017-2022, poor segment reporting, and low liquidity.

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