Citigroup: Wendy's Turnaround Appears On Track

The recent run-up for shares of Wendy’s International Inc. (WEN) to around US$40 has led Citigroup analyst Glen Petraglia to downgrade his rating to “neutral.” However, he stressed that this in no way means he has lost his confidence in the company’s turnaround efforts.

The stock’s recent surge can be attributed to takeover speculation. Wendy’s remains a potential leveraged buyout candidate, with a price in a the low-US$40s possible, Mr. Petraglia said in a note to clients. However, “given current valuation, we ascribe a low probability to a strategic buyer emerging,” he added.

Former shareholder William Ackan and billionaire investor Nelson Peltz have been pressuring the hamburger chain to make efforts to boost its share price.

Although the stock is not trading on fundamentals, according to Mr. Petraglia, he thinks Wendy’s turnaround appears on track.

His target price for the stock is US$39.

WEN 1-yr chart: