Krispy Kreme: Don't Let Facts Get in the Way of a Good Story

On one level it’s truly remarkable investors are bidding up Krispy Kreme (KKD) on a bullish report from Prudential Equity when the company hasn’t yet filed any 2006 numbers with the SEC. (And in case you haven't noticed, the year is almost over!)

This is the ultimate “don’t let the facts get in the way of a good story” story.

From the report: “In our view, the fact that the company is getting its financials filed is more important that the actual numbers presented. The numbers presented will likely be very ugly, and will have no basis on which we can judge the new Krispy Kreme business model.”

Well, if that's the case, how in the name of serious financial analysis can any analyst issue such a report with a straight face? How can any analyst put a target on the stock, no less, when he doesn't know the numbers?

The answer, no doubt, can be found lower in the report when he gives the size of short interest in the doughnut maker’s stock.

With many of these companies, in this fast-moving market, analysts try to make a name for themselves as stock pickers hoping their recommendation will create a self-fulfilling prophecy by causing the stock to rise – in this case rise on something as empty as the calories in the company’s doughnuts.

Related: Krispy Kreme: Who Knew Something Yesterday?