We are in a secular bear market. High p/e stocks are disappearing. There is no basis for buying a high p/e stock, regardless of growth rate. An unhealthy single food product has limitations. Even a universally popular chain like McDonald's sells at one quarter the KREM multiple. SBUX is selling at about 40x current year's expected earnings. Single product companies often have runs and then peer out. This market has no placd to hide. Those who got in early will sell they can when the lockup expires. The point I want to make is that there is nothing exclusive enough to warrant a premium p/e for KREM. If you think that this stock can defy the broad market trend because of its exclusivity, you're dreaming. The price/sales ratio is over four; that alone shoud be cause for concern. In order for an investor to hold these shares, you would have to presume that the company can expand its presence with large increases in market share and per capita donut cosumption. The duration of this type of trend is hightly questionable.
KREM is in its early growth phase, like MCD in the late 60s. KREM has only exploited about 5% of its potential marketing area...leaving great room for future earnings gains. Donut sales, if anything, GO UP in a recession....two donuts and coffee are a cheap breakfast and taste soooooo good. Finally, you hear about the "lockup ending"....well, here's the clincher bull argument....the panicking shorts buying will swamp any selling buy longs. The managers no doubt no the probably terrific earnings. Why would they sell? It would be like selling McDonalds in 1965 at the start of a great growth.....McDonalds had a high PE...that didn't stop it from increasing 50 or a hundred fold in the next 20 years. Same with Coke. same with all great growth stocks.
Why would the managers sell at lockup, you ask? I can give you about 2 million reasons. Why do you think they had the 2million share secondary? Something else to notice. Most stocks don't have options so early after IPO. The options are being used for protection while propping up the price. After lockup ends there will be plenty of sellers, not just the insiders but whoever is currently helping support the price.
I remember vividly reading a shareholding
letter from the former CEO of Coke ...
He said that every person needs 64 ounces of
refreshment everyday, but Coke provides only 2 of
those ounces. He was trying to rebut critics
who say that Coke can't grow market share anymore.
What a bunch of baloney.
Yes, this CEO was sharp. But his " 2% " statement
was nothing but MARKETING BULLSHIT.
This is the same BS that KREM pump-and-dumpers
continue to claim :
"They're only 175 KK stores in the U.S. and store growth will go nowhere but up"
"Doughnuts are recession-proof"
"The experience of a doughnut-theatre is so unique, people will drive dozens of miles to get some"
Sure, krem * MIGHT * be "another SBUX". But
let's let them prove it over a couple full
years as a public company.
People are paying for KREM as if it has
ALREADY dominated the U.S. Using pre-split
prices, KREM IPO'd at $21 and zoomed to $108.
Does this accurately reflect "Growth" ??
Why would shorts "panic" after lock-up expiration?? My guess is that is exactly why most of them are here. My read on the stock is if it catches a down-draft of 2-3 days after lock-up expiration you could catch some severe momentum selling on this one. If you compare the niche food sellers this one has a forward PE that should be in the 30-35 range: not 65-75. A short with a target cover in the low 20's would be appropriate on this one.
small thats the part that pisses me off more than anything. he thinks he is god. he lectured in al gores class yesterday and still refused to answer questions. I really wish he would just step down.
sam, I agree 100% with your questions. What troubles me even more is why he doesn't address these questions that the public has been asking. It's as if he's untouchable by the media. He should be required to answer all of these questions.
gREENSPAN WAS A MINOR IN THE WHOLE MARKET DOWNTURN.
The bottom line is that infrastructure was at such a premium that every company out there ramped up and put out. WELL SUPPLY EXCEDED DEMAND AND THUS THE HUGE DOWNTURN IN THE MARKET. From the chip makers to the guy that produces the screws to put the computer together. That is this deterioration in a nut
my problem with greenscam is he killed the economy because of the market and "inflation fears" It isnt his job to controll the market and I could care less about the market but why did he kill an economy that was growing at 5.4% gdp to 0% in less than a year? Why did he hike 6 straight times w/o giving prior hikes the 6-18 months they take to have an effect? Why did he pump the economy with 18% liquidity in dec 1999? Why did he hike another 50 bp in may 2000 when the nasdaq had alredy dropped 25% and the gdp had dropped to 3.6%? Thats my problem with greenscam nevermind that he is a ego maniac that believes his own press and uses economic models that were outdated 25 years ago.
sec many are but a few come of as plain fear mongers. They seem to be the same people that were hyping like crazy at 5000. Wannabes. It is kinda funny. I like to keep the board balanced untill I have a another position. Goodluck
ditto....all of the bullish comments on this board would apply in the short term if this were a bull market.....
there are similarities to RIMM....RIMM/PALM/HAND were the darlings just a few months ago....RIMM was over $100
the bullish comments on KREM just smell, taste and act like DENIAL...great donuts, scary priced stock....investors are bailing on GE, IBM and have already bailed on the best biotechs, etc....anyone really think people won't run to take 10-20 baggers as soon as they can to offset losses in other stocks? puhleeze....
still reminds me of other food fads....worked for the law firm that represented TCBY in 1986...the stock skyrocketed to the 70's....great growth, revered product, based in the South (Little Rock)....I believe it fell from the 70's to mid teens in one day....you can look it up....
Sorry for the misspellings. I literally fell asleep at the keyboard last night.
TCBY was one of my first, fundamental shorts, covering after the Crash of '87 for an 80% profit. Their yogurt was inferior. Out West, we believe our food choices to be somewhat better and more health conscious than in the South, to be diplomatic about it.
Never bought into the obsessions with oversize, red meat meals, either,when Lone Star and other steak houses had a big run, fed by p/e expansion.
KREM is krap. It will die a slow death, just as they are expanding their manufacturing facilities. Competition will expand due to the media-fed (CNBC, are you listening) mania.