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Takeaway: We like $WEN for a the TRADE (range = $4.17-$4.66) duration, TREND & TAIL still broken

Idea Alert:  Keith bought WEN in the virtual portfolio this morning.

I believe that Wendy’s is a company heading in the right direction but it’s going to take years to fix.  In the short run the stock will make a better “trading stock” than a long term investment.  For longer-term investors we would look elsewhere for exposure to the QSR category at this point in time. 

Currently, we are seeing an uptick in same-store sales since the end of the second quarter.  Currently consensus estimate have WEN posting system-wide same-store sales of 2.5% (company SSS at 2.5% and franchised at 2.6%).  We believe that the current trends are several hundred basis points above those numbers. 

For a trade the stock could head back to $5. 

Longer-term., reimaging remains a dark cloud hanging over the Wendy’s story and we expect the stock to remain range-bound until investors gain more visibility as to the timeline and the cost associated with this core component of the brand revitalization effort.  There will be a time to get behind this stock but, for the foreseeable future, we will stay on the sidelines until we gain clarity on the company’s timeline and future cash flow generation.