5 Reasons To Like Wendys Right Now

Wendys Co WEN has recovered lost sales since the start of the COVID-19 pandemic and the fast-food chain should see growth in 2021, according to Northcoast Research.

The Wendys Analyst: Jim Sanderson upgraded Wendys' stock from Neutral to Buy with a new $28 price target.

The Wendys Thesis: The case for turning bullish on Wendys' stock is five-fold, Sanderson wrote in the note.

Related Link: Wendy's Strong Q3, Momentum Prompts Upgrade

1. Proprietary checks point to "resilient" breakfast sales and management should increase its advertising budget by an extra $8 million in 2021 to further support morning daypart sales.
2. 2020 includes a 53rd week of sales so fourth quarter results should benefit from recent momentum and high comps in the additional 14th week.
3. Wendys international business should see further improvements as the company invests in omnichannel initiatives, including digital, delivery and drive-thru. While this is unlikely to show in 2021 results, higher average unit revenues will accelerate sales growth in later years.
4. Canada is Wendys most important market outside of the U.S. and proprietary checks suggest Wendys is benefiting from demand tracking above expectations.
5. U.S. store margins have fully recovered from low levels seen during the pandemic and should continue to benefit from stronger sales volumes.

WEN Price Action: Shares of Wendys traded flat Thursday at $23.14.