Wendy’s Faces Ongoing Challenges Amidst Strategic Unit Closures and Margin Pressures, Analyst Recommends Sell

Morgan Stanley analyst Brian Harbour has maintained their bearish stance on WEN stock, giving a Sell rating on October 28.

Brian Harbour has given his Sell rating due to a combination of factors impacting Wendy’s current and future performance. Despite better-than-expected same-store sales in the U.S., the results were still negative, with a decline of 4.7%. This decline, although slightly improved from earlier expectations, indicates ongoing challenges in the domestic market. Additionally, while international operations remain a positive aspect, the company faces tougher comparisons in the fourth quarter, particularly in October, which is anticipated to be the lowest point.
Moreover, Wendy’s has announced plans to close approximately 300 U.S. units through 2026 as part of its Project Fresh initiative, which focuses on increasing average unit volume rather than expanding the number of units. This strategy could lead to minimal net unit growth in 2025 and potentially affect growth in 2026. Although the company’s operational excellence initiatives have shown some positive impact, the closure of units and ongoing margin pressures, such as beef costs, contribute to a cautious outlook. As a result, Harbour maintains a conservative stance on Wendy’s stock, reflected in his Sell rating.

In another report released on October 28, Mizuho Securities also initiated coverage with a Sell rating on the stock with a $8.00 price target.