Analyst Expects High Inflation to Hit Wendy's Stock

Puts are popular in the options pits this morning

Deputy Editor
Apr 18, 2022 at 10:23 AM
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According to BMO, high inflation will put more pressure on fast-food chain Wendys Co (NASDAQ:WEN) than it will some of its peers. The firm noted that McDonald's (MCD) tends to be more resilient, while others in the sector should still see sales due to their inexpensive menus. Consequentially, BMO downgraded Wendy's stock to "market perform" from "outperform," with a price-target cut to $22 from $28. 

At last check, WEN is down 2.6% to trade at $20.35 after the bear note, falling below its April 12 one-year low of $20.36. Year-to-date, Wendy's stock is down 14.8%, and continues to see pressure at the $21.20 level. Still, the stock's current trading area just below the $20.40 level captured two steep pullbacks already this year. 

Analyst sentiment coming into today was bullish, leaving plenty of room for further adjustments. Of the 31 in coverage, 14 now carry a "hold" or worse rating, with 17 a "buy" or better. Plus, the 12-month consensus price target of $26.41 is a 29.3% premium to current levels. 

Over in the equity's normally quiet options pits, bearish traders are targeting WEN straight out of the gate, with put volume running at 23 times what's typically seen. The May 19 put accounts for most of this activity, with new positions being opened there. 

It's also worth noting that the security ranks low on the Schaeffer's Volatility Scorecard (SVS), with a score of just 16 out of 100. In other words, Wendy's stock has consistently realized lower volatility than its options have priced in, making the stock a potential premium-selling candidate.

 

 

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