The Wendy’s Company (Nasdaq: WEN) is no stranger to memes. In 1984 the fast-food chain launched an ad campaign highlighting the small patty size of its competitors by asking “Where’s the beef?” —a campaign that was so successful it has not only stood the test of time, it remains a popular meme to this day.
Now, 37 years later, Wendy’s has become a meme stock, as the first fast-food company to see its stock price boosted by the enthusiasm of retail investors on Reddit. As the stock continues to generate significant retail interest, Wendy’s has found itself on the other side of its famous campaign as investors ask “Where’s the beef?” when it comes to the stock’s long-term prospects.
From hamburger joint to Reddit meme stock
As with most restaurants, the onset of the COVID-19 pandemic and the enforced social distancing that it necessitated took a major toll on Wendy’s business. Following the former Trump Administration’s declaration of COVID-19 as a national emergency in the U.S. on March 13, 2020, just five days later, on March 18th, Wendy’s saw its stock plummet to a closing price of only $7.47, as the nation was forced to shelter in place. Comparatively, the stock closed its first day of trading in 2020 at $22.34 on January 2nd. Since then Wendy’s stock has consistently been trading in the $22 to $23 range, until last week when enthusiastic retail traders sent it as high as $29.46 on June 8th. Though the stock has since fallen off a bit, the support of Reddit traders has moved it up on the investment community’s radar.
Unlike many other meme stocks, where the only thing driving higher stock prices is the enthusiasm and wishful thinking of Reddit investors, less than 5% of Wendy’s shares are being shorted and the analyst community is overall supportive of its long-term prospects, with 11 of the 22 analysts who track the company recommending it as a strong buy or buy and the majority of remaining analysts suggesting that investors hold it.
Not only did the company’s second quarter earnings beat analysts’ estimates, but Wendy’s is predicting ongoing strength throughout the year.
“The strong start to the year and the momentum we are seeing in our global same-restaurant sales has given us the confidence to take up our system-wide sales guidance for 2021 from 8% to 10%. Our franchise system is engaged across the globe, and we are excited about the plans we have in place for the remainder of 2021,” said Todd Penegor, Wendy’s president and chief executive officer, on the company’s first quarter earnings call on May 12th.
Wendy’s has returned to the UK after 20 years
Penegor’s optimism is based on the company’s efforts to build up its recently introduced breakfast menu, widespread adoption of its digital ordering aided by COVID, and ongoing expansion in both the U.S. and abroad. On June 2nd, Wendy’s opened its first U.K. location in Reading, 20 years after leaving England, which is the start of a re-launch of its restaurants abroad.
“Wendy’s is a brand that, for about a decade, has been ranked high in terms of perceived value and quality – a brand that, unlike many others, has not been associated with food safety failures or political incorrectness,” said Dr. Darin Detwiler, Assistant Dean of Northeastern University’s College of Professional Studies Associate, a Professor of food policy and the author of FOOD SAFETY: Past, Present, and Predictions and Building the Future of Food Safety Technology. He believes Wendy’s social media presence has also been a major contributor to it becoming a meme stock. “Wendy’s Twitter account is associated with being innovative, unique and hilarious for its roasts of their competitors and brutal burns of Twitter users,” he said.
Not only has Wendy’s kept itself at the forefront of social media, its investment in digital also make it an attractive long-term investment, with the pandemic having expedited people’s acceptance of digital options within the world of fast food. Detwiler points to a recent report from Deloitte “The restaurant of the future arrives ahead of schedule: Time to get on board,” which highlights that consumers were already embracing digital engagement and convenience before the arrival of COVID, a trend that has only been solidified over the past 15 months.
“We saw this with the wide-spread adoption of apps for ordering food in-person (and even technology such as large screens inside Wendy’s to order without being at the counter, ordering and then picking-up in-person, and ordering to have a third-party delivery firm (DoorDash, Uber Eats, Grub Hub, etc.) bridge the distance for customers,” said Detwiler.
For investors looking to get in on the meme stock frenzy without taking major risks, Wendy’s may be one of the safer options for doing so as a long-term play. The company’s stock closed at $23.50 in its most recent day of trading on June 17th.
