Krispy Kreme's Growth Potential Filled With Holes, Wait for $15

Updated to add paragraphs three through five.

NEW YORK (TheStreet) -- Known for its sweet treats, Krispy Kreme (KKD) stock has been anything but a delight to investors in 2014.

The shares closed Tuesday at $16.19, down almost 15%, and they have lost 17% year to date.

Ahead of earnings, Krispy Kreme was already being outperformed by Dunkin' Brands (DNKN) and Starbucks (SBUX) in both gross and operating margins. There were concerns that the glazed doughnut maker was losing ground to them, among others. As it turned out, we underestimated the threat.

The stock, which was down 17% year-to-date, was also feeling the pressure of added competition from breakfast offerings served at McDonald's and Yum! (YUM) brand's Taco Bell.

With the company missing earnings and revising down its full-year outlook by 6%, it made no sense for investors to risk a possible 6% pullback while analysts adjust to lowered guidance. With shares resting around $16, a 6% pullback points to a value around $15. The stock needs to hit $15 before it's a buy.

Not only did Krispy Kreme report lower-than-expected revenue and profits, the company lowered guidance. At this point, investors that have waited patiently for some sweet news, will have to wait a while longer. Meanwhile, these shares are destined for a new 52-week low.

Krispy Kreme logged $121.6 million in first-quarter revenue, climbing 0.8% year over year, missing Street estimates of $126.5 by almost 4%. Management attributed the miss to (among other things) the severe winter weather, which led to 1.5% decline in same-store sales.

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