Buy Wendy’s on the coming Frosty innovation, says Wolfe Research

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Buy Wendy’s on the coming Frosty innovation, says Wolfe Research

Some major updates to the signature desserts at Wendy’s could make the stock much more enticing, according to Wolfe Research. In a Wednesday note, the investment firm reiterated shares of the fast food giant at an outperform rating, citing expected additions to the Frosty line-up this spring that could draw in new customers. Analyst Greg Badishkanian’s price target of $17 is about 13% above where shares closed on Tuesday. Wendy’s stock has slipped 19% in the past 12 months. WEN 1Y mountain WEN 1Y chart In mid-April, Wendy’s will unveil Frosty Swirl, a version of the frozen dessert with mixed-in flavors such as strawberry, caramel or brownie batter, the analyst said, citing social media checks. Then, Frosty Fusions will arrive in mid-May, allowing customers to add sauces or other toppings to their dessert, he said, explaining that these developments could open the window for Wendy’s to partner with consumer brands such as Oreos. Badishkanian added Wendy’s previously introduced Twisty Frosty flavors in the 2000s, which included toppings such as cookie dough, Oreos and M & Ms. This could conjure up “nostalgia related excitement” from Wendy’s customer base, he said. “We positively view both of these innovations given the potential to elevate the Frosty platform, which we think could generate consumer excitement and/or help with attachment rates,” the analyst said. “We would note, however, that the customization could result in some increased operational complexity.” Wendy’s said last week that its growth rate is expected to improve this year. “The improved growth rate does seem to contemplate some help from menu innovations/collaborations (including the recently announced Girl Scout collaboration Frosty),” he said. Wendy’s investor day in March should shed further light on product rollouts.

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