Krispy Kreme Stock Sell-Off: Should You Buy the Dip?

From an analytical perspective, It's been a tough past few months for Krispy Kreme (DNUT 2

Moreover, Veteran investors know that the best time to buy a great stock is "on sale. " Krispy Kreme s are most definitely trading at a discount

However, a stock isn't necessarily great simply because it dipped

Here's some food for thought if this ticker has made its way back onto your radar

This analysis suggests that re's no denying the drama undermining the stock's price, however

Although it was never disclosed exactly how much this arrangement was generating for Krispy Kreme, in light of the sheer reach of McDonald's, it arguably wasn't insignificant

Additionally, Image source: Getty Images

However, The recent decision to cut its dividend payments doesn't exactly bolster the bullish argument, either, in today's market environment

Moreover, Krispy Kreme's woes began well before the dividend cut and the end of its relationship with McDonald's, in light of current trends

Furthermore, The divestiture of its stake in Insomnia Cookies beginning late last year pared back reported revenue as well

People are just eating healthier, too, looking to lose some of the bad eating habits -- and some of the pounds -- added during the COVID-19 pandemic, in this volatile climate

Krispy Kreme picked up weight as well during this time, in the form of debt

DNUT Revenue (TTM) data by YCharts

Now the company wants to become bigger, but it recognizes that to do so, it will first need to become better

Conversely, That means de-leveraging its balance sheet by paying down at least some of the debt that's ultimately eating into fits (noteworthy indeed)

That's not easy to do if you're running the you want to evolve and expand while you're also shrinking some aspects of the operation (something worth watching)

Moreover, But there's always a chance that things will go as hoped

Furthermore, Enough reasons not to bite The question remains, however, in today's market environment

However, Is Krispy Kreme stock a buy ing what's turned into a longed, sizable sell-off

On the other hand, From a valuation perspective, not really

Analysts expect the company to remain in the red this year -- and next -- as it suffers the fallout from a couple of flopped partnerships and the new cost of paying down debt, in today's financial world

Moreover, It's also shifting from in-house to outsourced logistics that may end up costing it more in the long run

After all, a third-party dery service will be pricing in at least a little fit for itself, which Krispy Kreme didn't have to pay while it was handling its own transportation duties

Meanwhile, although it didn't explain exactly what it meant or how much it will cost, Krispy Kreme's plans to "strengthen [its] performance-based culture" ultimately sound an expense (noteworthy indeed)

At the same time, while "deploying capital to only the highest returning investments" makes enough superficial sense, the implication is that at least some semi-important initiatives could go underfunded, if not entirely unfunded

In contrast, In other words, all its plans are easier said than done, and all of them come at a cost of one or another

Additionally, Data source: StockAnalysis

Moreover, Furthermore, Then there's the not-so-small matter of suddenly becoming a meme stock (fascinating analysis)

A meme stock is a stock that's attracted the attention of an individual or group of traders specifically because they can influence that ticker's price, given current economic conditions

Sometimes they're talking it up because they own it

Other times, they're talking it down because they've shorted it, which is a bet that the stock's price will sink

All these groups or individuals will primarily exert this influence online, using clever digital imagery with a short message that's usually d online using social media

You know these images as memes

Sometimes it works -- and sometimes it doesn't

Additionally, Additionally, Given that the targeted stocks tend to be small-caps or low-float issues, these efforts usually work at least a little, but only for a little while

Additionally, The bullish memes have certainly lifted Krispy Kreme s out of the funk they were in through June

You want nothing to do with any ticker being targeted by anyone only looking to cash in on a short-term move they're creating (an important development)

In contrast, But only right up until the point it doesn't

Once it doesn't work anymore, it all unravels in a hurry (remarkable data)

And you never really know when that reversal is coming

Not now, but maybe later Don't misunderstand

Additionally, Nevertheless, Whether or not Krispy Kreme was one of the market's most active meme stocks at this time, there's still not enough of a bullish argument to justify the risk you'd be taking by buying it (which is quite significant), in this volatile climate

This company's struggling to remain fitable in the midst of a complicated overhaul

What the re reveals is might all work out in the end

However, there could be plenty of misery in the meantime (fascinating analysis)

Being a meme stock only adds to the near-term uncertainty

There are far better risk-versus-reward scenarios to choose from right now

Nevertheless, Still, you have to respect the willingness to at least try to fix what's broken (noteworthy indeed)

Plenty of companies would be too fearful of making any major changes or doing anything differently than what they were already doing

It might be fun to check back in on Krispy Kreme two to three years down the road, which is when analysts collectively believe it's going to be fully out of the red and back in the black.