What Investors Should Know About Wendy's Sudden Surge
Key Points
Wendy's recently appointed a new CEO and CFO, both of whom have experienced reenergizing struggling brands.
Wendy's stock has fallen more than 65% in the past five years.
The company plans to significantly expand its footprint in China.
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Meme stock mania strikes again, with The Wendy's Company (NASDAQ: WEN) shares soaring as much as 42% this week. No, Wendy's didn't suddenly sell a record number of hamburgers or launch a new signature sandwich. The surge was caused by a viral post on Reddit's (NYSE: RDDT) infamous WallStreetBets forum. The group decided to rally behind Wendy's as an institution worth "saving."
Much like GameStop and AMC a few years ago, Wendy's was the perfect fit for the meme-stock lovers. As a brand that has underperformed for quite some time and is heavily shorted, Wendy's has gained support from activist Redditors. While meme-style investing is not recommended for long-term investors, there are legitimate reasons to be cautiously optimistic about Wendy's future.
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Can Wendy's make a serious comeback?
First, Wendy's just named industry veteran Steve Cirulis as chief financial officer and chief strategy officer. He and CEO Bob Wright previously worked together to turn around Potbelly Sandwich Works. During their time at Potbelly, shares climbed more than 500%. Their strategy with Wendy's could potentially have similar positive results.
Image source: Getty Images.
Secondly, Wendy's expansion plans, particularly in China, could be an important growth engine for the company, as the U.S. market is largely saturated. Chinese consumers have really embraced American fast food over the past decade, but competition is increasing there as well.
It won't be easy for Wendy's
The path forward is still quite steep for Wendy's. It is significantly trailing the competition in foot traffic, and same-store sales are in a prolonged slump. Meme stock rallies are also notoriously volatile and unpredictable.
For investors, it's important to remember to focus on the company's financials and strategy execution. Wendy's is primed for a turnaround, but it'll neither be quick nor based on viral Reddit posts. Time will tell if the turnaround plan is truly working in the coming quarters.
Should you buy stock in Wendy's right now?
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Reddit. The Motley Fool has a disclosure policy.
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