Analyst Optimism Shows That Wendy’s Isn’t Just a Meme Trade

Stocks to buy

There are cold wars and there are trade wars — and then there’s the chicken sandwich war. It’s delicious and exciting, and has a new contender: Wendy’s (NASDAQ:WEN). With that in mind, investors should seriously consider WEN stock as a promising play on America’s fast-food addiction.

Source: Jonathan Weiss / Shutterstock.com

Wendy’s is faring well with two menu items: its Classic Chicken sandwich and its spicier Jalapeno Popper. And if you’re hungry for profits, WEN stock has recently attained meme-stock status. Indeed, it seems that — for better or for worse — the Reddit army has set its sights on Wendy’s.

There’s nothing inherently wrong with that. Still, informed investors should look past the memes and see what Wendy’s truly has to offer.

A Closer Look at WEN Stock

The only thing more piquant than a Jalapeno Popper might be a share-price pop. We observed one of those in WEN stock in early June, and it was quite tasty for folks on the right side of the trade.

Here are the specifics: Wendy’s shares were chugging along at $23 when the stock suddenly leaped to a high of $29 on June 8. The very next day, the stock started to tumble and by June 16, it was back to about $23 again.

Reddit traders may have been the catalyst/culprits. For example, one Reddit poster called Wendy’s the “Most memed company on the internet if it gains traction then, frenzy+scarcity+low volume means minimal buys could push the price quickly.”

That sounds like a recipe for a short squeeze if I ever heard one. Just be advised that these social-media-fueled run-ups typically don’t last long. As we’ve seen, WEN stock is a perfect example of this.

Data to Feast On

If you’d like something more substantial than meme mania, check this out: Wendy’s pays out a forward annual dividend yield of 1.7%. That’s a nice little bonus for income-focused investors. Plus, WEN stock has a trailing 12-month price-to-earnings ratio of 36. This indicates a fairly reasonable valuation.

Next up on the menu is a sampler platter of Wendy’s first-quarter 2021 stats:

  • Net income of $41.4 million, or 18 cents per share. That’s a vast improvement over the $14.4 million, or 6 cents per share, reported last year.
  • Revenues of $460.2 million, easily beating the $405 million from Q1 2020. That’s also better than than the $444 million predicted by the analyst community.
  • Earnings of 20 cents per share on an adjusted basis. The average analyst estimate was 15 cents per share.
  • Global same-store sales increased by 13% from a year ago.

Clearly, Wendy’s chicken sandwich has been a hit.

Analysts Take a Bite Into WEN Stock

Some big-name analysts are prepared to ignore the memes and discover WEN stock’s impressive value proposition. Reportedly, Piper Sandler analyst Nicole Regan reiterated an “overweight” rating while assigning the shares a price target of $27.

“Consumers have all but flipped a switch, noting sales channels are shifting from drive-thru back to dine-in. Most (if not all) concepts are up across the board,” Regan explained.

Northcoast analyst Jim Sanderson was slightly more ambitious, upgrading Wendy’s shares from “neutral” to “buy” and issuing a price target $30. And with the mean analyst price target at $26.15, it’s conceivable that WEN stock has room for upside.

For all I know, the meme-stock crowd might push WEN stock back up again. But those rallies can be short-lived. After all, short squeezes come and go, and the crowds can be fickle. A better strategy is to learn about Wendy’s and its rising sales and revenue data, then order up a few shares — if you’re ready.

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On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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