Why Krispy Kreme Stock Is Up By 9% Today

Krispy Kreme Stock Rallies After Strong Earnings Report

Shares of Krispy Kreme gained strong upside momentum after the company released its fourth-quarter report. Krispy Kreme reported net revenue of $370.6 million and adjusted earnings of $0.08 per share, beating analyst estimates on revenue and missing them on earnings.

The company noted that its fourth-quarter revenue grew by 13.8% on a year-over-year basis and that the growth is 21.5% adjusted for the extra week in 2020.

Krispy Kreme CEO Mike Tattersfield said that the company was “well-positioned to deliver another year of double-digit revenue growth in 2022”. He added that Krispy Kreme could be opened in at least three new countries in 2022, boosting the firm’s global reach.

In the next year, the company expects to report net revenue of $1.53 billion – $1.56 billion and adjusted earnings of $0.38 – $0.41 per share.

What’s Next For Krispy Kreme Stock?

Krispy Kreme went public in the middle of 2021, and the stock immediately touched highs above $21.50. While the company’s first day at the marketplace was strong, the stock quickly found itself under pressure and touched lows below the $13 level in November 2021.

Assuming that the company manages to report 2022 earnings at the midpoint of its guidance, the stock is trading at 38 forward P/E. This is not cheap, and the current valuation level explains why the stock has found itself under pressure immediately after the IPO – this IPO was somewhat overpriced.

While the quarterly report was strong and the company’s plans for 2022 look ambitious, the dynamics of the stock will depend on whether the market is ready to buy high-PE stocks again.

The recent geopolitical tensions and worries about Fed policy have put material pressure on growth stocks, and it remains to be seen whether speculative traders and investors are ready to buy Krispy Kreme stock at levels above $15.

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