Wendy‘s (WEN +7.84%) becoming the next big meme stock wasn’t exactly on my bingo card for 2026, but here we are. A surge of interest among Reddit (RDDT +13.93%) traders caused the beaten-down restaurant stock to soar by as much as 50% from its recent lows.
Retail investors chasing meme stocks — especially after their initial spike — rarely works out well. Volatile moves based on investor sentiment (not earnings or business momentum) are impossible to predict, and that’s what is happening here. Wendy’s has been dealing with declining same-store sales, brand issues, and other problems in its aging fast-food business. But that’s not to say that there aren’t some excellent stocks to consider in the restaurant industry right now. Here are two in particular that deserve a closer look.
Image source: Getty Images.
The restaurant operating system
Toast (TOST +3.07%) has been beaten down from its highs on fears that AI advancements will disrupt its business. But it has a stronger competitive moat than you might think. Not only does Toast provide an entire restaurant ecosystem that replaces functions restaurants have historically paid dozens of vendors for, but it is also a full-stack provider, meaning it has proprietary hardware and software. And because it is used in more than 171,000 restaurant locations, it can help reduce training costs (many new employees will already be familiar with the platform).
Today’s Change
(3.07%) $0.85
Current Price
$28.68
Key Data Points
Market Cap
$17B
Day’s Range
$28.31 – $29.18
52wk Range
$22.26 – $49.66
Avg Vol
12.4M
Gross Margin
26.23%
In the latest quarter, Toast’s annual recurring revenue (ARR) increased 26% year-over-year, and the business was highly profitable. With a price-to-sales valuation near its lowest level as a publicly traded company and a stock price about 45% below its 52-week high, Toast could be an excellent bargain at current levels.
The turnaround is real
Starbucks (SBUX +1.15%) made a big change a couple of years ago, hiring longtime Chipotle (CMG +2.96%) leader Brian Niccol to lead a turnaround. Starbucks had been struggling with declining same-store sales, technology issues, and customer experience challenges. In short, its situation wasn’t unlike Wendy’s.
However, we’re starting to see real signs of progress in the numbers. Niccol’s strategic pivot, which was known as the “Back to Starbucks” initiative, has dramatically improved service efficiency. There have been several positive changes to the customer experience. And Starbucks is finally doing a great job of product innovation (such as its protein-enhanced beverages).
Starbucks’ comparable sales in North America declined for about two years but are finally starting to recover. In the most recent quarter, Starbucks reported 32% year-over-year EPS growth and is now expecting full-year comparable sales growth of at least 5%.
The bottom line is that chasing meme stocks like Wendy’s might look fun, but trying to time entry and exit points on a short-term, volatile trade is usually a losing battle. Instead, focus on making long-term investments in businesses whose fundamentals are heading in the right direction.
Matt Frankel, CFP® has positions in Starbucks. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Reddit, Starbucks, and Toast. The Motley Fool recommends the following options: short September 2026 $35 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
Leave a comment