Why Is Krispy Kreme Stock Surging? A Deep Dive into the Hype

Krispy Kreme (NASDAQ: DNUT) stock has surged dramatically, climbing over 50% in a single week as of July 24, 2025. 

This unexpected rally has sparked curiosity among investors, with many wondering what’s behind the donut chain’s meteoric rise. 

From social media frenzy to short squeezes, this article explores the factors driving the surge while examining the company’s troubling fundamentals.

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The Meme Stock Revival Takes Hold

Krispy Kreme’s stock, trading under the ticker DNUT, soared 26.7% on July 22, followed by a 4.6% gain on July 23, peaking at $5.73 before closing at $4.32.

The surge is driven by retail investors on platforms like Reddit’s r/WallStreetBets and X, where hashtags like #DNUTSqueeze and #KrispyMoon have gone viral. 

Trading volume hit a record 151 million shares on July 23, far above the 50-day average of 5.28 million, signaling intense retail interest.

Short Squeeze Dynamics

A significant factor in the rally is Krispy Kreme’s high short interest, with 28-32% of its free-float shares shorted. 

This makes it a prime target for a short squeeze, where retail buying forces short sellers to cover, driving prices higher. 

Data from Bloomberg Terminal shows bearish positions dropped 15% in 48 hours, reflecting the pressure on short sellers. Similar patterns have lifted other meme stocks like GoPro and Opendoor in July 2025.

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Krispy Kreme’s Financial Struggles

Despite the stock’s surge, Krispy Kreme’s financials paint a grim picture. In Q1 2025, revenue fell 15.3% year-over-year to $375.2 million, while the net loss widened to $33.3 million from $8.5 million. 

The company’s Altman Z-Score of 0.5 indicates financial distress, and analysts expect Q2 revenue to drop to $370-$385 million, compared to $438.8 million in Q2 2024.

Debt and Strategic Shifts

Krispy Kreme carries $970.4 million in net debt, a heavy burden for a company with negative free cash flow. 

The recent sale of its majority stake in Insomnia Cookies for $75 million and the termination of a McDonald’s partnership, previously spanning over 2,400 locations, highlight efforts to cut costs.

However, these moves have reduced revenue, with the Insomnia sale alone impacting sales by $64.3 million year-over-year.

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The Power of Social Media in 2025

The 2025 meme stock wave leverages platforms like X, Reddit, and TikTok, amplifying hype at unprecedented speed. 

The #KrispyMoon hashtag garnered 18K+ TikTok views in 72 hours, while the DNUT ticker’s quirky appeal drew younger traders. 

Unlike the 2021 GameStop frenzy, which was largely Reddit-driven, today’s rallies use multi-platform strategies, with memes and videos creating self-fulfilling momentum.

Psychological Drivers

Retail investors are motivated by three key factors: fear of missing out (FOMO), a desire to challenge Wall Street, and community validation from online forums. 

An X post captured the mood: “It’s 2025, but it feels like 2021 again.” This nostalgia, combined with Krispy Kreme’s cult-like brand loyalty, fuels speculative trading, despite warnings from analysts about the risks.

The Risks of Meme Stock Mania

Meme stocks are notoriously volatile, with Krispy Kreme’s 38.74% volatility and intraday swings of up to 39% in pre-market trading. 

Historical data shows meme stock rallies often collapse, Opendoor, for example, fell 20.5% on July 23 after a 330% July gain. Late entrants risk being caught in liquidity traps where early buyers profit but others face losses.

Regulatory Concerns

The SEC has issued updated warnings, stating that “social media hype does not reflect investment merit.” Risks include pump-and-dump schemes, where bad actors inflate prices before selling, and extreme volatility that can wipe out gains. 

Gen Z investors, many of whom started trading during the 2021 meme stock peak, are particularly vulnerable due to limited experience. Platforms like Robinhood now employ circuit breakers to mitigate wild price swings.

Read Also: PLUME Price Prediction 2025–2030, Growth or Hype?

Should Investors Jump In?

Krispy Kreme’s global presence and brand strength are positive, with 425 new points of access added in Q1 2025 and plans for expansion in markets like Brazil and Germany. 

However, its negative earnings, high debt, and paused dividend raise red flags. The stock’s price-to-sales ratio of 0.3 suggests undervaluation, but ongoing losses make it a speculative bet.

Expert Insights

Analysts, including those at Morgan Stanley, caution that the rally is “disconnected from fundamentals.” The Motley Fool recommends focusing on long-term investments rather than chasing meme stocks.

For those considering DNUT, experts advise risking only what can be afforded to lose and setting strict exit strategies to avoid sudden downturns.

Conclusion

Krispy Kreme’s stock surge is a textbook case of meme stock mania, driven by social media buzz and short squeezes rather than business performance. 

While the company’s iconic brand and loyal customer base spark excitement, its financial challenges, declining revenue, mounting losses, and significant debt, urge caution. 

Investors should approach DNUT with rigorous research, monitor SEC advisories, and consult financial advisors before diving into this volatile rally. 

Meme stock gains can be as fleeting as a fresh donut, and history suggests many will be left with crumbs when the hype fades.

FAQ

Why is Krispy Kreme stock (DNUT) surging in July 2025?

A viral meme stock rally fueled by Reddit, X, and TikTok hype, plus a short squeeze, pushed DNUT up over 50% in just one week.

What triggered the DNUT short squeeze?

Over 30% of DNUT’s free-float was shorted. Retail buying pressure forced shorts to cover fast, sending the stock price flying.

Are Krispy Kreme’s financials backing this rally?

Not at all. Revenue is down 15.3%, losses are growing, and the Altman Z-Score is just 0.5, signaling financial distress.

What risks should traders watch out for?

Wild volatility (up to 39% intraday swings), regulatory warnings, and a history of meme stock crashes like Opendoor’s 20% drop post-pump.

Is DNUT a smart investment right now?

Only for high-risk traders. Fundamentals are weak, debt is high, and earnings are negative. Don’t chase the sugar rush without a clear exit.

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