Binge on Some Sweet Profits with Krispy Kreme Shares

Everybody loves a good sequel, right? OK, not everyone is delighted to see doughnut maker Krispy Kreme (NASDAQ:DNUT) available for public trading again, but some folks might be interested in capitalizing on the return of DNUT stock.

A close-up of a sign for Krispy Kreme (DNUT) donuts.
Source: James R. Martin / Shutterstock.com

You’ve got to admit, there’s a sizable fan base surrounding Krispy Kreme. Those doughnuts probably aren’t healthy, but they sure taste good and they keep the customers coming back for more.

But the billion-dollar question is: will the company’s delicious doughnuts translate to tasty profits? And, why did DNUT stock go away in the first place?

No worries – we’ll take a big bite out of those questions today. But first, let’s warm up with an appetizer of technical analysis.

A Closer Look at DNUT Stock

In its second debut to the public, DNUT stock started trading at $16.30 on July 1, 2021.

Prior to that, the marketed price range was $21 to $24, while the initial public offering (IPO) price was set at $17.

On that (second) first day, the shares traded as low as $15.50 but closed at $21.

That, unfortunately for the investors, turned out to be the short-term peak. As it turned out, DNUT stock slid during the following weeks, landing near $17 on July 16.

In other words, Krispy Kreme shares gyrated but ultimately went nowhere.

That’s certainly disappointing, but let’s bear in mind that this story isn’t finished yet. We’re still in the early stages, and investors should consider this a marathon, not a sprint.

First Time Wasn’t a Charm

So, what ever happened to the first incarnation of DNUT stock?

To answer that, let’s cover a little bit of background information. Based in Charlotte, North Carolina, Krispy Kreme is owned by a Luxembourg-based conglomerate known as JAB Holding.

And as a matter of fact, JAB Holding will continue to own nearly 78% of DNUT stock after the IPO. So obviously, there’s no lack of conviction here.

In the first go-round, Krispy Kreme went public 21 years ago. The timing wasn’t ideal, as this took place during the dot-com bubble.

Suffice it to say that this chapter didn’t have a happy ending. So, a deal valued at $1.35 billion, JAB Holding took Krispy Kreme private in 2016.

And now, DNUT stock is back and personally, I think it’s a well-timed IPO.

The skeptics might disagree with me, based on the health-food craze that’s going on right now.

To that, I’ll counter that in the wake of the Covid-19 pandemic, comfort food is still in demand.

Reminded of their mortality, people want something decadent – and Krispy Kreme’s more than happy to assuage the American consumer’s sweet tooth.

An Affordable Indulgence

OK, I’ll admit it. The DNUT stock IPO wasn’t an immediate success. But does this mean that debut No. 2 is destined for failure?

Not necessarily. Krispy Kreme remains a powerhouse among doughnut makers, with $321.8 million in net revenue for the quarter ending to April 4, 2021.

If that figure didn’t impress you, then consider that it represents a 23% year-over-year increase.

Clearly, Krispy Kreme is selling doughnuts like hotcakes. To put a finer point on it, the company sold a whopping 1.3 billion doughnuts across 30 countries in fiscal-year 2020.

The fact is, the American consumer’s craving for junk food isn’t going away anytime soon. And as a cheap sugar fix, Krispy Kreme’s doughnuts have global appeal.

“As an affordable indulgence enjoyed across cultures, races, and income levels, we believe that Krispy Kreme has the potential to deliver joyful experiences across the world,” the company stated.

The Bottom Line

Some folks might consider the recent debut of DNUT stock to be a disappointment.

However, I would ask them to reconsider their position on this.

The demand for comfort food hasn’t vanished, and the numbers prove this.

So, investors might want to give Krispy Kreme another chance, now that the IPO sugar rush has come and gone.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


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