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Why Shares of Krispy Kreme Donuts Soared on Thursday

By Jim Halley – Aug 19, 2021 at 3:59PM

Key Points

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A big rise was a sweet deal for investors a day after the stock fell following its earnings report.

What happened

Two days after the stock faltered a bit following a mixed earnings report after Tuesday's close, Krispy Kreme (DNUT -4.11%) jumped more than 15% in early afternoon trading on Thursday.

The stock closed at $13.07 on Wednesday, opened at $13 on Thursday, then rose as high as $15.03 in intraday trading. The stock just had its initial public offering (IPO) on July 1, but Thursday's price is still down from its high of $21.69.

Person sitting in a chair with feet on window cell enjoying a box of donuts in a conference room.

Image source: Getty Images.

So what

It appears the stock is becoming a meme favorite. After all, who doesn't love donuts?

That's as good an explanation as any why the stock jumped a day after it fell from $14.56 to $14.04 following its second-quarter earnings report, which was announced after the market close on Tuesday. Another possible explanation for the rise was that investors realized the numbers were not that bad and the market simply overreacted on a day where everything else seemed to go south.

It was the company's first earnings report since going public. It reported revenue of $349.2 million, up 43% year over year and above analysts' predictions of $333.4 million. Earnings per share were $0.13, a little lower than analysts' estimates of $0.14, but still an improvement of 30% over the same period in 2020.

The company reported a loss of $15 million, which it attributed to the costs of it going public during the quarter. Krispy Kreme also announced that it was raising prices, which should boost its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin above the 15% it reported in the second quarter.

Investors may have also been buoyed by the company's full-year guidance. Krispy Kreme said it expected net revenue of $1.34 billion to $1.38 billion, representing a year-over-year rise of 19.4% to 23% and adjusted net income of $62 million to $68 million, showing growth of 46.4% to 60.6%.

Now what

There's no way to sugar coat this. Don't be surprised if the stock falls a bit on Friday as investors take profits.

In the long run, however, there's no reason the stock can't continue to gradually climb. It's become more of an international company, adding business in Great Britain, Ireland, Australia, New Zealand, and Mexico in recent years. It's also focusing on increasing margin.

The pandemic forced the company to adapt and, as a result, it has strengthened its e-commerce trade. CEO Michael Tattersfield said that in the first half of the year, 19% of the company's business was from e-commerce.

Jim Halley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Krispy Kreme, Inc. Stock Quote
Krispy Kreme, Inc.
DNUT
$15.18 (-4.11%) $0.65

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