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Why Wendy's Stock Was Gaining Today

What happened

Shares of Wendy's (NASDAQ: WEN) were gaining today as the fast-food chain seemed to benefit from an analyst note and rose along with the broader market.

The stock finished up 6.4% as a number of restaurant stocks moved higher, and the S&P 500 rose 3.4% as well.

Image source: Wendy's.

So what

Hope that the U.S. is making progress toward controlling the COVID-19 pandemic and signs that the spread is slowing in Europe seemed to lift markets today. A foreseeable end to the pandemic would be a great sign for restaurant stocks. The industry has been hit hard by the virus, which has forced restaurants in a number of states to limit themselves to just takeout and delivery.

Last Thursday, Wendy's said it would close its restaurant dining rooms, and it withdrew its full-year guidance because of the coronavirus. This morning, Piper Sandler analyst Nicole Miller Regan lowered her price target on the stock from $24 to $15, but kept her overweight rating. That follows a similar move last Friday from Longbow Research analyst Alton Stump, who noted that Wendy's could pick up market share since the outbreak could force smaller, independent operators to close.

Now what

Wendy's stock had fallen nearly 70% at one point during the coronavirus sell-off, but the stock has bounced back over the last couple of weeks as investors seemed to believe it was oversold. Last week's $2 trillion rescue package from the federal government also seems to have boosted confidence that chains like Wendy's won't experience major long-term losses.

Still, there's no question that the weeks ahead will be tough for the fast-food chain. It has already allowed franchisees to defer payments on rent and royalties, and it will likely have to keep such policies in place for as long as restaurants are closed. While that will put a big dent in its bottom line, over the long term the company should be able to recover.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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