Retailers are looking at each other anew Wendys.
The fast food chain’s shares rose after a Tuesday Post on Reddit’s popular WallStreetBets forum described Wendy’s as “the perfect stock” for the group because of its signature products and “effective” social media presence.
Two market analysts warned investors not to jump into the hype.
“I think the reason the Reddit crowd is pushing it today is because the retail stock float at Wendy’s is pretty small, but I can guarantee you nothing changed overnight to change the basic story” Michael Binger, president of Gradient Investments, told CNBCs “Trading nation” on Tuesday.
Although the company has a “decent business model” and can benefit from the economic reopening, its stock trades at a remarkably high price-earnings multiple for only 3% revenue growth, he said.
According to FactSet, the stock even exceeded its average analyst price target of $ 27.85.
“We’re looking for a separation between valuation and fundamentals,” said Binger. “With the price targets being hit at this level here, I just don’t think it’s a good entry point here. Unless you’re the nimble trader I’d just stay away from Wendy’s. I think it’s a target and price hit it is relatively expensive compared to other stocks in the group. “
Other names in the category are far more attractive, said Chantico Global founder and CEO Gina Sanchez in the same “Trading Nation” interview.
Wendy’s not only left its competitors far behind over the course of the year the coronavirus pandemic, but also the expectations resulting from the lock are not sufficient, said Sanchez, also chief market strategist at Lido Advisors.
“Your expectations arising from the pandemic are fine, they’re not bad, it’s a proven business model, but they’re not as good as the rest of the group,” she said.
“Brinker – which didn’t do very well during the pandemic – has high expectations, “she said.” And so this stock just isn’t that attractive compared to other stocks.