Why Krispy Kreme (DNUT) Stock Is Nosediving

Kayode Omotosho /
2024/02/13 12:45 pm EST

What Happened:

Shares of doughnut chain Krispy Kreme (NASDAQ:DNUT) fell 8.3% in the morning session after the company reported fourth quarter results with EPS falling below Wall Street's estimates. In addition, the company continued to burn cash. On the other hand, revenue beat analysts' expectations this quarter, driven by strong organic growth and more new store openings than anticipated. Looking ahead, the full-year 2024 earnings forecast came in below Consensus. Overall, this was a mediocre quarter for Krispy Kreme.

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What is the market telling us:

Krispy Kreme's shares are not very volatile than the market average and over the last year have had only 8 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 8.5% on the news that the company reported third quarter results with revenue, gross margin, adjusted EBITDA, and EPS all falling below analysts' expectations. These misses were driven by underperformance in its U.S. division, which accounted for 63.9% of sales this quarter. A number of restaurant and other discretionary companies have highlighted an uncertain consumer spending environment in the US as of late. On top of that, its revenue guidance for the full year was underwhelming. On the bright side, it opened more stores than projected, giving it more opportunities to grow its top line in the future. Overall, this was a bad quarter for Krispy Kreme.

Krispy Kreme is down 9.9% since the beginning of the year, and at $13.28 per share it is trading 16.8% below its 52-week high of $15.95 from July 2023. Investors who bought $1,000 worth of Krispy Kreme's shares at the IPO in June 2021 would now be looking at an investment worth $632.14.

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