The stock of quick service restaurant chain Wendy’s (WEN) has risen nearly 40% in the past two days as individual retail investors treat it as a meme stock.
A meme stock is a publicly traded company whose share price goes viral on social media, experiencing big price swings as a result.
Typically, individual investors target stocks of well-known companies that have fallen on hard times and whose shares are heavily shorted on Wall Street.
In a coordinated effort, retail investors push stocks like Wendy’s higher in a short squeeze, forcing professional traders to buy shares as the price rises to cover their short bets.
Past meme stocks have included video game retailer GameStop (GME) and Canada’s BlackBerry (BB), among others.
In Wendy’s case, its stock rose 25% on June 24 and is up another 12% in premarket trading on June 25 as investors pile into the heavily shorted fast-food chain.
WEN stock has now experienced its biggest advance since June 2021. However, even with the current gains, Wendy’s stock is still down 66% over the last five years.
Wendy’s is currently the most-discussed stock on Reddit’s (RDDT) online message boards, which include WallStreetBets.
The well-known burger chain has struggled in recent years amid growing competition.
Wendy’s stock currently has a market capitalization of only $1.50 billion U.S., making it a small-cap security.
The shares are currently trading at 10 times this year’s earnings estimate, which is less than half the average of stocks in the benchmark S&P 500 index.
The steady share price decline has pushed the dividend yield on Wendy’s stock up to 7%. The company currently pays a quarterly distribution of $0.14 U.S. per share.
However, analysts say the current surge in Wendy’s stock has nothing to do with fundamentals and comes as investors execute a short squeeze on the shares.
WEN stock is currently trading at $8.44 U.S. per share, down 30% in the last 12 months.
