Shares of Wendy’s Co (NASDAQ: WEN) are unlikely to recover much in the near term, said a BMO Capital analyst on Monday. The stock is down 15% for the year.
Andrew Strelzik reveals a $22 price target on WEN
In a note this morning, Andrew Strelzik downgraded WEN to “market perform” and slashed his price target to $22 a share that represents hardly a 5.0% recovery from here.
According to the senior analyst, inflationary pressures will likely weigh on discretionary spending – a macroeconomic environment that Wendy’s is not well-positioned to withstand. Consequently, it’ll be difficult to meet comparable growth and margin expectations. He wrote:
Valuation is undemanding, but it will be difficult to argue for multiple expansion if estimates are moving lower.
Chad Morganlander agrees with the bearish call
On CNBC’s “Power Lunch”, Washington Crossing Advisors’ Chad Morganlander agreed with the bearish call and said Wendy’s is a lower quality name in the food space that he’d rather avoid at present.
It’s about pricing; can Wendy’s increase prices to keep up with margin pressure? This one has some trouble also due in part because it has a lot of debt on its balance sheet. It’s below investment grade by S&P. So, you’re not getting paid well for taking that risk.
Wendy’s revenue remained roughly the same in its fiscal fourth quarter on a year-over-year basis. It is expected to report its Q1 results on May 11th. The stock trades at a PE multiple of 22.90.
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