The Reddit-fueled stock price boom continues to impact the market. Not only have shares of video-game retailer GameStop and movie theatre company AMC jumped to unheard-of highs in price and market activity, but many other companiesincluding Wendyshave joined as well.
Wendys is a decades-old fast-food restaurant chain and household name. Founded by Dave Thomas in 1969, Wendys set itself up as the home of square beef hamburger patties and chocolate Frosty desserts.
Wendy’s became a meme stock on June 8 when shares of WEN rose by 26% after a Reddit users positive commentary on the stock.
TL;DR
- Wendys Co. (NASDAQ:WEN) opened its first burger restaurant in Ohio in 1969.
- Wendys has been publicly traded on the Nasdaq since 1976, where it offered 1 million shares at $28 apiece.
- In June 2021, Wendys became the first fast-food company to achieve meme stock status.
- Wendys was the second-most popular ticker page on Yahoo Finance on June 8, beaten only by fellow meme stock Clover Health.
- Unlike most other stocks that the WallStreetBets community of retail investors pushed, Wendys had a low percentage of its shares in short positions and was not a failing company.
- The surge in WEN share prices was short-lived, and its stock settled into a $22-$25 per share price range over the course of June.
Why Wendys became a meme stock
Wendys caught the attention of retail investors after a user of the Reddit forum r/WallStreetBets posted a favorable comment about its stock potential. Its the third-largest quick-service restaurant company and operates in three primary segments: U.S. & international branches and the Global Real Estate & Development arm.
A Reddit user kicked off the surge in Wendys stock prices on June 8 with a mention of the company as the perfect stock for WallStreetBets traders thanks to Wendys signature products and strong social media presence (the company is famous for viral tweets).
President of Gradient Investments Michael Binger said at the time, “I think the reason the Reddit crowd is pushing it up today is because the retail share float is pretty small in Wendys, but I can guarantee you nothing changed overnight to change the fundamental story.” He also recommended that only the savviest of traders consider investing in Wendys.
Results of the meme stock popularity for Wendys
Why did Wendys grow so popular among WallStreetBets? It could be because, although Wendys has been a fast-food staple for a long time, it showed what Investopedia called laggard behavior instead of being a leader among competing chains.
Wendys has not drawn the ire of Wall Street or regulators the way that GameStop and other meme stocks did. This is likely because under 5% of the companys outstanding shares are in short positions, and Wendys is generally a more fundamentally sound company than some other WallStreetBets targets.
Were there any Wendys stock trading halts during meme stock volatility?
When a stocks price increases or decreases a certain amount in a short enough period of time, this volatility can trigger stock halts.
Shares of WEN surged from $22.94 at closing on June 7 to as much as $29.46 on June 8, eventually closing at $28.87. However, the increase of up to 26% wasnt enough to result in a WEN trading halt. A Wendys spokesperson told Yahoo Finance they were monitoring the unusual trading activity.
Related: What causes stock halts?
What to expect for the future of Wendys stock
Wendys didnt perform as well as many other fast-food chains throughout the pandemic, and its early post-pandemic performance is lacking against the competitive benchmark, too.
On the other hand, Wendys beat analyst projections for its first-quarter results in 2021. Wall Street had expected $444 million in revenue and $0.14 of per-share earnings. Wendys beat that with $460 million in revenue and adjusted profits of $0.20 per share. Same-store sales in Q1 of 2021 were up 13.5% in the US, with a 7.9% increase in same-store sales internationally.
The company has shown signs of growth, as it recently announced strategic plans for a nine-year expansion in central Asia: the Republic of Georgia, Uzbekistan, and Kazakhstan. Just last spring, the chain launched its first-ever breakfast menu in an attempt to compete more fully with McDonalds and others with breakfast options.
Bottom line
Although Wendy’s may not have reached the same level of growth as its fast-food counterparts during COVID-19 restrictions, it’s a legitimate business with a recognizable brand. The unusual spike in share prices may not have lasted long, but after fifty-plus years of staying power, Wendy’s may have steadier growth in its future. This is opposed to the sudden spikes and drops common in meme stocks culture.
Due diligence is important for WEN and other stocks, but it may only get you so far in a world where meme stock enthusiasm is fast and furious.