Analyst Says Wendys Can 'Navigate' Through Coronavirus, Upgrades Stock

Wendys Co WEN appears to be mostly insulated from coronavirus-induced headwinds and is well positioned to grow once the pandemic is resolved, according to Wedbush.

The Wendys Analyst

Nick Setyan upgraded Wendys from Neutral to Outperform with a price target lifted from $22 to $21.

The Wendys Thesis

Wendys' provided a business update on March 26 which suggests it can "navigate through" the coronavirus "relatively unscathed," Setyan wrote in the note. Specifically, through March 22, global same-store sales growth was trending at 2.8% in the first quarter, including a 20% decline in the U.S. for the last week. Same-store sales growth was trending 4% prior to the decline.

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After the March 2 launch of breakfast, Setyan said same-store sales growth was 15% during the first week breakfast was launched versus a same-store growth of 4%. This suggests that breakfast was tracking above the 10% goal set by management.

While this growth rate is unlikely to be sustainable, it does imply a pre-coronavirus 6% to 8% of 2020 sales target as realistic at worst. The company is likely to resume a marketing campaign for its breakfast option no later than the first half of 2021.

Over the longer-term period, management is unlikely to introduce any changes to its growth and digital targets and these may prove to be easier in a post coronavirus universe. The research firm is lowering its 2020 EPS estimate from 62 cents to 17 cents, 2021 is lowered from 79 cents to 45 cents.

WEN Price Action

Shares of Wendys were trading flat Tuesday at $14.95.