This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Krispy Kreme Stock Finds Its Sweet Spot Again

NEW YORK (TheStreet) -- Krispy Kreme (KKD) has found its sweet spot again.

Two months ago I was convinced there was more downside for the doughnut maker. I was right.

Read More: Warren Buffett’s Top 10 Dividend Stocks

Management had stunned investors with a one-two punch -- missing earnings and guiding down full-year estimates by 6%. The way I saw it, it only made sense for investors to wait for a corresponding 6% pullback, suggesting a buy target around $15 per share. The stock (then) traded at $16.19.

Last week patient investors were rewarded. Shares bottomed at $14.82. I say "bottomed" because there was still the chance that Krispy Kreme would qualify as a falling knife.

At around $16, shares are up roughly 10% from that 52-week low but down 16% on the year to date. The recent 10% spike is a strong indicator Krispy Kreme has seen the worst.

At current levels, the stock is trading at just 18 times 2015 estimates of 87 cents per share. This multiple is four points lower than the industry average P/E. By comparison, rivals Dunkin Brands (DNKN) and Starbucks (SBUX) are trading at forward P/Es of 21 and 24, respectively.

Krispy Kreme is being discounted for one reason only -- its earnings miss and downward revision. The good news is Krispy Kreme doesn't have any more weather-related impacts to worry about. Assuming that management can meet or exceed its full-year net income target of $51 million, investors are looking at  attractive comparable-store sales heading into next year. Recall, the prior high range was $55 million.

Wall Street is only looking for full-year 2014 earnings per share of 73 cents. Given management's recent cost-cutting efforts and margin improvement, 75 cents to 78 cents is not out of the question. So at around $16 per share, now is the best time to get back into Krispy Kreme because the stock has a strong shot of hitting $20 in the next six to 12 months.

Read More: 7 Stocks Jim Cramer Sees Ripe for Takeover

Krispy Kreme CEO Anthony Thompson took office effective June 1. Thompson's record as a strong detail-oriented manager of Papa John's International (PZZA), leading the company against larger rivals Dominos (DPZ) and Pizza Hut, should help Krispy Kreme emerge out of the shadows of Starbucks and Dunkin.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,070.09 -1.13 -0.01%
S&P 500 1,976.61 -1.19 -0.06%
NASDAQ 4,503.1280 -2.7240 -0.06%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs