Shares of Wendy’s exploded today as Reddit’s merry band of traders piled in:

Beloved burger and Frosty chain Wendy’s (WEN) has won the honor of being the first fast-food stock to get roped into the red-hot meme stock trade.

Shares of Wendy’s spiked 16% in early afternoon trading on Tuesday after a favorable mention by traders on Reddit.

Shares closed up over 25% for the day, and packed on another 4% so far after hours:

Over 84 million shares were traded today, versus an average of 3 million. Options activity also exploded:

Investors bought 115,831 call options on the stock. This is an increase of approximately 6,360% compared to the typical daily volume of 1,793 call options.

Wendy’s slogan is “deliciously different,” and indeed it has some major differences from the usual meme stocks. The fast food chain turns out solid profits, versus substantial losses at Gamestop and AMC. It made $41 million in net income in the most recent quarter, and $117 million in 2020.

Wendy’s valuation is nearly as rich as its burgers, with a price to earnings ratio of 55 for the most recent year, compared to an average of 37 for the S&P 500. But at least the meme hordes are focusing on a company that has a real, viable, money making business.

Perhaps for this reason, Wendy’s stock is not heavily shorted, with just 4.6% of shares sold short. This removes one catalyst for further gains, but I’d still feel better holding a profitable company’s stock than that of an unprofitable company.

One way in which Wendy’s makes sense as a choice for Wallstreetbets: it’s a beloved, consumer-facing brand. We don’t see a lot of companies like oil services giant Schlumberger or document management firm Iron Mountain catching their attention. But business to business companies can be great moneymakers. This appears to be something of a blind spot for some retail traders.

In any event, I look forward to seeing where Wendy’s stock goes, and to trying their new breakfast menu!

More on meme stocks:

Photo: “Your Choice – A 1970 Ford Pinto or 10 Piece Chicken Nuggets From Wendy’s?” by Sister72 is licensed under CC BY 2.0

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