Roger
Business Owner, Former Assistant Research Professor
Red Robin should benefit as beef prices fall, and the US reopened the border to Mexican cattle imports, officially from August 24. Red Robin has been deleveraging by selling corporate stores to franchisees to repay the last of its $150m debt, against a market cap of about $170m. Overleveraging is what wiped it out from $88 a share in 2015. x.com x.com x.comÂ
Wendy's seems to have more upside than downside because Peltz might bid $8 a share if he is willing to offer $7. x.comÂ
Wendy's carries considerable execution risk despite trading at just 7x price to free cash flow versus a historical norm of about 21x, because free cash flow is forecast to fall 22% this year and 15% in 2027 before a potential rebound. McDonald's is the preferred choice. x.comÂ
Red Robin's turnaround is unproven, with the stock back at IPO prices from over 20 years ago after its growth story collapsed. Reports cite bad executive decisions and a refusal to correct course, though it now shows signs of a turnaround. Technically, its prior long-term support line could flip to resistance; the bigger signal is whether margins and foot traffic, both in collapse, can re-accelerate. x.comÂ
Wendy's stands to profit from rising US fast-food consumption, which will only continue. Fast-food stocks are surging, and Wendy's in particular has broken a multi-year downtrend aggressively. x.comÂ
Wendy's has squeeze potential backed by real fundamentals: short interest is 30% of a small 160 million-share float, and its forward P/E is cheaper than Domino's, McDonald's and Cheesecake Factory. WallStreetBets is trying to squeeze it as it did Beyond Meat, but unlike Beyond, Wendy's has good fundamentals. x.comÂ
Restaurants are struggling, making Red Robin unattractive to own. Former restaurant ownership and complaints from restaurant-owner friends underpin the short view. x.comÂ
Wendy's will probably rise a few hundred percent as WallStreetBets pushes it, given its short interest, market cap, meme appeal as a household name and ability to repay debt if it squeezes. x.comÂ
Wendy's fundamentals are falling apart, so the stock was never cheap even well off its highs. It has posted six straight quarters of falling same-store sales as smaller portions and higher prices erased the value proposition that defined the brand. Meritage Hospitality, the franchisee running 314 of its restaurants, just filed for Chapter 11 after its store-level earnings fell 48% last year. x.comÂ
A cattle bear market is a cheeseburger bull market for Wendy's and Jack in the Box, as cattle prices move toward a bear phase. x.comÂ
Wendy's is no longer worth holding after Trian said it has no plans to bid for the company at this time, per @wallstengine. x.comÂ