The Wendy’s Group (NYSE: WEN) is suffering from as much negative investor sentiment as Facebook (NASDAQ: FB). Some analysts believe the fast-food chain is about as overvalued as Facebook is from its recent IPO flop. The burger restaurant has announced that it will sell five of its company-owned stores in order to alleviate the cash bleed from the balance sheet. The company is saddled with massive debt and an important image in its customers minds.
Wendy’s might not be as hyped as Facebook’s IPO, but the valuation given at the start of the trading bell was generous in consideration of their earnings levels or their competitive position in the market. Their earnings release showed admittance that they are struggling against the dominant burger chains in the country. What’s worse- even the industry leader, McDonald’s, is facing a tough time capturing the changing taste of consumers with its newly revamped offerings and the attempt of offering what every other coffee chain does. Second place competitor Burger King has outpaced Wendy’s in terms of offering at least healthier options and gourmet drinks for its customers, and it saw growth in that menu offering.
In Wendy’s case, it appears that they are not interested in changing with the times. Even management teams at Burger King finally gave up when they were not generating revenues from their previous core market. As the consumer market becomes conscious of their food choices, there is an obvious need for changes in Wendy’s offerings.
The trading action for Wendy’s last week (Thursday, May 29th) went from $4.70 to $4.50 on May 31st. Yahoo did a news article on the company last May 8th citing multiple problems of the beleaguered company, as well as the rising costs that seems to be the main culprit for their decline as explained by their CEO.
With the current slump in the market caused by Facebook’s IPO flop, investors are clamoring for changes and for those that have yet to invest, they need to seriously consider their options if Wendy’s is worth their capital, considering the fundamentals of this company.