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Brand Face-Off: Burger King Worldwide Inc (BKW) vs. The Wendy's Co (WEN)

Evaluating WEN and BKW from technical and sentiment viewpoints

by 12/2/2013 2:02:28 PM
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Fast food giants Burger King Worldwide Inc (NYSE:BKW) and The Wendy's Co (NASDAQ:WEN) have both made notable strides on the charts in 2013, yet the equities can't seem to shake the lingering bearishness on Wall Street. As such, let's dig deeper into the data, and analyze how such skepticism could impact the stocks' future price action, from a contrarian point of view.

Since the beginning of the year, BKW has tacked on 39.6% to perch at $21.30. Meanwhile, WEN has gained a whopping 57.1% since the open on Feb. 21 -- when the company started its major transformation, which included remodeled stores and a revamped menu -- to trade at $8.62. At their current prices, both equities are nearing technical milestones. Specifically, BKW is just a stone's throw away from its record peak of $21.73, reached in mid-June, while WEN is less than a dollar shy of its five-year high of $9.51, tagged on Nov. 6.

Daily Chart of BKW since January 2013

 Daily Chart of WEN since February 2013

Still, the brokerage bunch has ignored BKW's and WEN's technical strength, giving out mainly bearish ratings for the stocks. From its eight covering analysts, BKW has received just one "strong buy" endorsement, compared to five tepid "holds" and one "sell" suggestion. Likewise, nine of WEN's covering analysts have slapped the equity with a "hold" or worse rating, while just five have handed out "strong buy" recommendations.

Furthermore, both BKW's and WEN's respective price targets of $21.86 and $8.65 are about on par with their current prices. In other words, both may see some upgrades and/or price-target hikes in the near term, which could send the shares soaring.

Elsewhere, short interest on BKW increased 3% during the latest reporting period, and now accounts for 10.6% of the stock's available float. Similarly, short interest on WEN grew 14.9% during the same time frame, now representing 15.3% of the equity's float. In other words, both BKW and WEN could end up benefiting from short-covering activity, should the shares continue on their upward trajectories.

Meanwhile, in the options pits, activity has been more bullish than usual recently. BKW's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 19.20 ranks higher than all other similar readings taken over the past year, indicating option traders have bought to open calls over puts at an annual-high pace during the last two weeks. Likewise, WEN's corresponding 10-day call/put volume ratio of 8.20 demonstrates call-focused activity in the equity's options pits, as well. However, this ratio ranks in the 58th annual percentile, meaning call buying is just slightly heavier than usual, relative to puts, right now.

Looking forward, Burger King Worldwide Inc (NYSE:BKW) and The Wendy's Co (NASDAQ:WEN) both have plenty of room for growth in the short term, as speculators and/or analysts on Wall Street capitulate to the equities' bullish camps.

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