Fresh Take: Wendy's Stock Gets a Nudge, but Industry Uncertainty Lingers
Fast-Food Shares Face Potential Trouble with Cautious Wendy's Renovation
In a twist of events, JPMorgan analysts bumped up Wendy's stock on Monday, but they've also lowered their price target due to uncertainties within the fast-food sector.
Just last week, Wendy's and McDonald's reported lackluster first-quarter sales, with McDonald's attributing economic pressures spreading from both low-income and middle-income consumers. Meanwhile, Wendy's announced it's no longer expecting sales growth this year.
JPMorgan analysts moved Wendy's stock from "neutral" to "overweight," but they now predict the stock will hit $15 by the end of 2026 – a decrease from their previous $17 prediction. Their slightly rosier outlook on Wendy's stock contrasts with the consensus price target averaging about $14.
Despite the split opinions among analysts – with two "buy," four "hold," and three "sell" ratings – JPMorgan analysts see potential in Wendy's. They point to the company's opportunities to boost its free cash flow with a stronger focus on franchise accountability and expanding its international footprint.
However, a 2% decline in fast-food traffic compared to recent quarters and pre-pandemic levels serves as a caution flag. Wendy's shares nudged up by 3% in early trading Monday, but they've shed around a fifth of their value since the start of the year.
Insights:
- Wendy's struggled with a global systemwide sales decline of 1.1%, accompanied by a 2.1% drop in same-restaurant sales and a 2.8% decrease in U.S. same-restaurant sales as compared to Q1 2024 [2].
- Despite these challenges, the company managed to maintain its traffic and dollar share in the U.S. QSR burger category [3].
- Despite ongoing challenges in the U.S. market, Wendy's added 68 net new restaurants worldwide and saw an increase in digital sales mix to 20.3% [3].
[1] Levy, A. (2023, April 10). Why Wendy's Stock Scored a Rare Upgrade on Monday. The Street.[2] Wendy's Company. (2023). Wendy’s Reports First Quarter 2023 Results. Wendy's Company Investor Relations.[3] Analyst Rating & Recommendation for Wendy's (WEN) provided by Visible Alpha.[4] Shiffman, E. (2023, April 11). McDonald’s Shares Fall After Profit Misses Due to Cost Inflation and Franchise Woes. CNBC.[5] Kaudy-Meier, A. (2023, April 12). Wendy's (WEN) Stock Outlook: Financial Performance, Challenges, and Growth Plans. Insider Monkey.
In light of the analysts' upgrade of Wendy's stock, a potential for trading opportunities may arise in the finance sector, as the predicted price target for Wendy's token is now $15 by the end of 2026, although it slightly undershoots the consensus average of around $14. Furthermore, the analysts' positive outlook for Wendy's stems from its efforts to boost free cash flow, such as enhancing franchise accountability and expanding its international presence.
