Why Wendy's Stock Tanked on Tuesday
Key Points
A clutch of analysts reduced their price targets on the fast-food industry stalwart.
This wasn't a coincidence; the moves came on the heels of the latest earnings report.
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A wave of analyst price target cuts made Wendy's (NASDAQ: WEN) stock a very unappealing investment on Tuesday. Those moves closely followed the fast food company's latest set of quarterly earnings, which fell notably short of top-line guidance for this year. The company's stock lost more than 6% of its value that trading session.
Unwanted cuts
By my count, no less than ten analysts tracking Wendy's made such adjustments that day, following the company's fourth-quarter and full-year 2025 earnings release last Friday.
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Among the numerous researchers doing so were those at investment banking heavyweights Goldman Sachs and Morgan Stanley. The former's Christine Cho trimmed her price target to $7 per share from $8, while maintaining her sell recommendation. Her peer Brian Harbour at Morgan Stanley reduced his to $8 per share from $9, also keeping his equivalent of a sell designation intact.
Although Wendy's beat on both the top and bottom lines for the quarter, it posted notable declines in major fundamentals. Total sales fell by 8% year over year to $3.4 billion, while per-share net income not in accordance with generally accepted accounting principles (GAAP) plummeted by 36% to $0.16 per share.
Worse, its guidance for full-year 2026 non-GAAP (adjusted) net income -- $0.56 to $0.60 per share -- was well short of the consensus analyst projection of $0.85.
Not a tasty meal just now
In an environment where once-beloved food and beverage stocks have fallen from favor -- I'm looking at you, Chipotle Mexican Grill and Starbucks -- a rather traditional fast food purveyor like Wendy's has to excel to earn investor favor. With those recent declines in key fundamentals, it's not getting the job done, and I can't imagine a scenario where the company suddenly turns this around. I'd avoid Wendy's stock these days.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Goldman Sachs Group, and Starbucks. The Motley Fool recommends the following options: short March 2026 $42.50 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
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