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Where Is Krispy Kreme Headed in the Long Run?

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Krispy Kreme's stock almost tripled from June 2012 to March 2013, but it looks like its strong run is likely over.

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Krispy Kreme (NYSE:KKD) has risen from the dead in the past year after being in the doldrums for four years after its 2008 crash. The stock almost tripled from June 2012 to March 2013, but it looks like its strong run is likely over.

Below is the one-year daily chart, which shows that KKD broke its steep uptrend last month, and has since broken below its multi-month support level around 13.50. That bodes poorly for the stock in the short term.


One-year daily chart of KKD, Courtesy of Bloomberg
Click to enlarge

In the long run, major support for the stock is around the $10 level. The five-year weekly chart shows that the stock made an important breakout above the $10 level to start 2013. That is the first area where I might get interested on the long side.


Five-year weekly chart of KKD, Courtesy of Bloomberg
Click to enlarge
But the fundamental outlook for KKD is not exciting overall, as it's projected to earn $.60 per share to $.75 per share by 2014, hardly an exciting proposition for a stock trading around $13 (around a 20 P/E), especially since earnings growth is expected to slow in the next two years. I really would stay away from this name on either side of the ledger.

This item by Enis Taner was originally published on RiskReversal.com.

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No positions in stocks mentioned.
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