Label is displayed for a newly created Paragraph entity instead of its preview in layout builder

Problem/Motivation

On a layout builder page, creating and adding a block that references a paragraph entity leads to the display of "Orphaned 'name of the paragraph':" (which is the label of the paragraph entity) instead of the paragraph entity's preview. This happens only with those paragraphs that are displayed via a custom formatter (in this case: Drupal\slick_paragraphs\Plugin\Field\FieldFormatter\SlickParagraphsVanillaFormatter) that extends the Drupal\slick\Plugin\Field\FieldFormatter\SlickEntityFormatterBase class which extends the Drupal\blazy\Dejavu\BlazyEntityBase

The piece of code that does this:

if ($entity->id()) {
  $this->buildElement($build, $entity, $langcode);

  // Add the entity to cache dependencies so to clear when it is updated.
  $this->formatter()->getRenderer()->addCacheableDependency($build['items'][$delta], $entity);
}
else {
  $this->referencedEntities = NULL;
  // This is an "auto_create" item.
  $build['items'][$delta] = ['#markup' => $entity->label()];
}

is inside the `buildElements` method of Drupal\blazy\Dejavu\BlazyEntityBase

Steps to reproduce

1. Create a paragraph type: Slide
2. Add fields to paragraph: Title (text), Media (Image), Description (text - formatted, long)
3. Create a custom block type: Slider
4. Add field to block type: Slide (Paragraph reference: Slide)
5. Manage display of block type: Slide (Formatter: Slick Paragraphs Vanilla)
6. On a page with layout builder, add One column section
7. Click Add component in the section
8. Create a custom block - Slider and add it on the page

Expected behaviour: Rendered preview of the slider.

Actual behaviour: "Orphaned 'name of the paragraph':"

Proposed resolution

This behaviour is observed only when the block is newly created and upon saving the page layout and revisiting the block it is rendered correctly with its preview. So, as seen in the above code, this is because only the label is being displayed for an "auto_create" item and commenting the condition outputs the expected behaviour. It would be better to know more on why this condition is in place and what should be done in this case.