BW Online | April 23, 2001 | Too Rich at Krispy?

U.S. EDITION
Full Table of Contents
Cover Story
Up Front
Readers Report
Corrections & Clarifications
Books
Technology & You
Economic Viewpoint
Economic Trends
Business Outlook
News: Analysis & Commentary

In Business This Week
Washington Outlook
International Business
International Outlook
Science & Technology
Developments to Watch
Management
People
Social Issues
Legal Affairs

Finance
BusinessWeek Lifestyle
BusinessWeek Investor
The Barker Portfolio
Inside Wall Street
Figures of the Week
Editorials

SMALL BIZ SUPPLEMENT April 23 Table of Contents

INTERNATIONAL EDITIONS
International -- Asian Cover Story
International -- European Cover Story
International -- Latin American Cover Story
International -- Letter From Amsterdam
International -- Spotlight on Australia
International -- Readers Report
International -- Asian Business
International -- European Business
International -- Int'l Figures of the Week
International -- Editorials

PREMIUM CONTENT MBA Insider

BW MAGAZINE Get Four Free Issues Register Subscribe Customer Service

ONLINE FEATURES Book Reviews BW Video Columnists Interactive Gallery Newsletters Past Covers Philanthropy Podcasts Special Reports BLOGS Auto Beat Bangalore Tigers Blogspotting Brand New Day Byte of the Apple Economics Unbound Eye on Asia Fine On Media Green Biz Hot Property Investing Insights Management IQ NEXT: Innovation NussbaumOnDesign Tech Beat Working Parents TECHNOLOGY J.D. Power Ratings Product Reviews Tech Stats Wildstrom: Tech Maven AUTOS Home Page Auto Reviews Classic Cars Car Care & Safety Hybrids INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads

BW EXTRAS BW Digital BW Mobile BW Online Alerts Dashboard Widgets Podcasts RSS

RSS Feeds

Reprints/ Permissions Conferences Research Services

APRIL 23, 2001

INSIDE WALL STREET

Too Rich at Krispy?

Gene G. Marcial

STORY TOOLS

Printer-Friendly Version

E-Mail This Story

Chart: Not Quite Piping Hot

INSIDE WALL STREET

Too Rich at Krispy?

A Bigger Field for Churchill Downs

How Autodesk Weathers the Crash

A big favorite of short-sellers these days--outside of their plum targets in techs--is Krispy Kreme Doughnuts (KREM ). Operating some 180 stores (of which 90 are franchised) in 28 states, it has become famous for its sweet, superrich pastries, especially its popular "original glazed." The shorts aren't dazzled, but they could be wrong. And if they are, they would have to cover their huge short positions. The open interest in put options on Krispy's stock far exceeds the call positions. That means the bears are betting that the stock will crash. The 2.5 million shorted shares equal nearly 10% of Krispy's shares outstanding. But that's just dandy for options expert Bernie Schaeffer: Although still bearish on the market, Schaeffer is strongly bullish on Krispy. "As a contrarian, I like the idea that the shorts are all over Krispy Kreme, ignoring the company's strong fundamentals and technicals," says Schaeffer, CEO of Schaeffer's Investment Research and editor of The Option Advisor newsletter. Earnings almost tripled in the fourth quarter, beating analysts' estimates by nearly 20%. Krispy expects to earn 69 cents a share in the year ending Jan. 31, 2002, vs. analysts' estimates of 65 cents. Krispy, which will soon move to the Big Board, went public on Apr. 5, 2000, at split-adjusted $10.50 a share. Schaeffer sees Krispy, now at 36, doubling in a year.

The bears contend that Krispy's price-earnings ratio of 52 is too rich. And they expect sales, which hit $300 million in 2001, to fall short of the projected $367.4 million in 2002. John Ivankoe, an analyst at J.P. Morgan Chase, says the "stock continues to be driven by better than expected comps, store growth, and earnings." Krispy is "appropriate for longer-term investors," he says, and is now priced at an "attractive entry point."

By Gene G. Marcial

Get BusinessWeek directly on your desktop with our RSS feeds. XML

Add BusinessWeek news to your Web site with our headline feed.

Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.

To subscribe online to BusinessWeek magazine, please click here.

Learn more, go to the BusinessWeekOnline home page