Krispy Kreme (KKD) 41.83 +3.87: While I'm not one to pass up a doughnut if offered, I think it is
time to take a pass on KKD... The stock of this leading doughnut maker has enjoyed an amazing run
over the past couple months amid a flood of good news... However, Briefing.com contends that
Friday's stock split marks the end of the positive news cycle... Don't get us wrong... KKD will continue
to post impressive top- and bottom-line growth over the next several quarters... But at 107x estimated
earnings, the good news is more than priced in... Krispy Kreme, which has been a "safe haven" during
the tech wreck, now taking on many of the valuation characteristics of the bloated tech companies
investors fled... At these multiples, all it would take is one whiff of bad news, real of perceived, and the
stock would get dunked... If you need comfort from this market, take it in the doughnuts, not the
stock... The exceptionally wide divergence between the stock price and its long-term moving averages
confirms the overextended nature of the stock... Briefing.com's initial downside target is in the 34-32
range, with penetration setting the stage for a long-term slide to the 25 area. -- Robert Walberg,
Briefing.com |
