Wendy's Shares Fall After Analyst Expresses Concerns Over Valuation

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Wendy's Co.'s stock dropped 2.3% in premarket trade Wednesday, after Credit Suisse issued a downbeat research note on the fast-food restaurant chain highlighting concerns that current share price valuations overstate future growth propects. Analyst Jason West initiated coverage of the stock with an underperform rating, and says it's the "bottom pick" in the restaurant sector he started covering. His $9 price target is 16% below Tuesday's closing price of $10.75. "Our problem with the [Wendy's] story comes back to the ideas of valuation and growth (or lack thereof)," West wrote in a note to clients. He believes the positive strategic moves Wendy's has made in recent years have already been largely priced into the stock, and he isn't expecting much, if any, store growth in the U.S. and overseas. The stock has run up 24% in the past three months, while the S&P 500 has gained 0.4%. Separately, West initiated Dunkin' Brands at outperform with a $56 stock price target, and said the donut and coffee seller was his top pick in the sector. He also initiated Chipotle Mexican Grill at outperform, Starbucks at outperform, McDonald's at neutral and Yum Brands at underperform.

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