With all the hype focused on the “then and now” of Nasdaq hitting 5,000, I thought it would be interesting to bring up and track one famous stock that went public during the Nasdaq’s heyday — Krispy Kreme Doughnuts (NYSE:KKD).
I have followed KKD stock off and on since its initial public offering, and Krispy Kreme Doughnuts is one that I’m usually bearish on when I decide to trade It. Krispy Kreme Doughnuts made its IPO debut in early April 2000 at $21 per share.
The ticker symbol was KREM back then when shares traded on the Nasdaq. A little over a year later, Krispy Kreme Doughnuts switched to the New York Stock Exchange, and the ticker switched to the current KKD.
KKD stock formed a classic “double-top” north of $40 over its first few years before plunging to the low $2 level by 2008. Needless to say, the run from $2 to over $20 since then has been astounding — a classic 10-bagger by Wall Street’s standards.
The near-term chart for Krispy Kreme Doughnuts shows that KKD stock has formed a solid base at $21 – $20.50 and has held its 50-day moving average since early February.
Earnings are due out after the close today and will likely either be the straw that breaks the camel’s back or fuels a continued run to multi-year peaks.
KKD stock recently set a fresh 52-week high of $22.32, and the two-year chart is showing that the next layers of resistance are at $23.50 – $24.
If Krispy Kreme Doughnuts were to announce a sweet quarter with raised guidance, shares could easily test the aforementioned hurdles, which would represent a 10%-plus move from current levels.
If Krispy Kreme disappoints, shares could test $20 – $19.50 on a pullback, which means that a break below the 50-day moving average could lead to a test to the 100-day moving average.
The longer-term chart shows that a “symmetrical triangle” has formed, with shares setting up for a 5% – 10% move over the near term.
The major moving averages are also curling higher. So, the chart is bullish on a number of different levels. However, I also found some bearish news in my research.
KKD has missed Wall Street’s estimates in three of the past four quarters. Two of the misses were by just a penny, while the other was a miss of 3 cents per share. One quarter was a match.
Analysts are currently expecting Krispy Kreme to earn 17 cents per share on revenue just shy of $127 million. Analysts are still bullish on KKD stock despite the earnings misses over the past year.
One brokerage firm maintained its “buy” rating for KKD and $27 price target last December following an earnings miss. Krispy Kreme stock fell from $20 and tested $18 following the announcement.
In early September, KKD fell from $17.61 and tested a low of $16.51 before finishing just above $17, which was on the miss of 3 cents per share. Moreover, Krispy Kreme Doughnuts lowered its 2015 guidance on the earnings call to 69 cents per share to 74 cents per share, down from an expected 72 cents per share.
KKD tried to be slick in January after the Krispy Kreme “reaffirmed” this year’s guidance. However, in the process, Krispy Kreme also lowered 2016 full-year guidance to 79 cents per share to 85 cents per share. The suit-and-ties had been expecting 87 cents per share for 2016.
Everyone loves a doughnut now and then, but with society getting more health-conscience, I don’t believe Krispy Kreme is on the weekly repeat list for consumers.
Obviously, Wall Street is giving Krispy Kreme Doughnuts too much credit for its growth plans, despite the warning signs of KKD trying to lower expectations. I am bearish on Krispy Kreme, and I will be surprised if KKD delivers a “beat-and-raise” quarter.
With that in mind, I like the KKD April 20 puts at current levels to go short ahead of Krispy Kreme’s earnings release.
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