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Why Dole Stock Became a Meme Stock and Jumped 6% | The Motley Fool

What happened

Remember that you heard it here first: The Dole (NYSE:DOLE) fruit company is now a meme stock.

As Marketwatch reported this morning (OK, so I guess you actually heard it here second), “Reddit’s ‘Apes’ have gone bananas and made Dole … a meme stock.” Turns out this morning, momentum traders on Reddit decided that a fungicide-resistant fungus is going to devastate South American banana crops this year, boosting prices on the fruit and fattening Dole’s bottom line as a consequence.  

And Dole stock is up 6.3% as of 12:30 p.m. EDT because of this report.

A rising stock arrow superimposed over bunches of bananas.

Image source: Getty Images.

So what

As theories go, it’s not a bad one — not perfect, either. Even if the rumors are true, a shortage of bananas could just as easily hurt Dole’s business as help it. But here’s the thing:

The rumor doesn’t necessarily have to be true for investors to be right about Dole stock. Why not? Because the valuation on Dole speaks for itself.

Now what

Consider: Dole stock looks a bit pricey at 21 times earnings right now and with a market capitalization of $1.4 billion. Dig just a little deeper, however, and you’ll discover that this fruit vendor is actually something of a cash cow.

According to the latest data from S&P Global Market Intelligence, Dole generated nearly $148 million in positive free cash flow over the last year — more than twice its reported $60 million net profit. This gives Dole stock a sweet price-to-free cash flow ratio of less than 10. Plus, analysts forecast nearly a 10% annualized earnings growth rate for the company over the next five years.

Conclusion: Whether or not there’s a fungus, and whether or not Dole’s a growth stock, Dole is definitely a bona fide value stock today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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