Key Points
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Krispy Kreme stock saw significant sell-offs today despite no major news from the company.
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The company’s valuation pulled back ahead of the big Federal Reserve meeting that kicks off tomorrow.
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Krispy Kreme’s share price has surged thanks to meme stock trading, and that means the stock’s near-term outlook depends heavily on Fed policy.
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Krispy Kreme (NASDAQ: DNUT) stock got hit with significant sell-offs in Monday’s trading. The company’s share price closed out the daily session down roughly 7% and had been down as much as 9.5% earlier in trading.
There wasn’t any major company-specific news that pushed Krispy Kreme’s valuation lower today, but gains for the stock prior to today’s trading were also disconnected from the doughnut specialist’s fundamentals. Even with today’s pullback, the stock is still up roughly 26% over the last week.
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Krispy Kreme stock pulls back as meme momentum recedes
Krispy Kreme was among a handful of new meme stocks to see huge gains last week, but that momentum appears to be taking a breather early in this week’s trading. The stock market has recently surged to new all-time highs, and investors are betting that the Fed will announce a significant cut for interest rates at the two-day meeting set to kick off tomorrow. While investors seem fairly confident about a rate cut, it’s also not a sure thing.
What’s next for Krispy Kreme?
Krispy Kreme saw a significant valuation pullback earlier this year as the outlook for the company’s partnership with McDonald’s came to an end. The doughnut company is now moving forward with cost-cutting initiatives that could continue to help support margins amid a weaker sales outlook, but its recent valuation gains are largely disconnected from its fundamental performance outlook. The recent resurgence in meme-stock trading has given Krispy Kreme a substantial valuation boost, and a move from the Fed to cut interest rates this month will likely be essential to support the stock’s meme-driven gains.
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Keith Noonan 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.
