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Will Wendy’s stock soar after u-turn on ‘surge pricing’ after backlash?

Will Wendy’s stock soar after u-turn on 'surge pricing' after backlash?

Late in February 2024, the fast-food restaurant chain Wendy’s (NASDAQ: WEN) drew the attention and ire of the internet when it announced it would, in the future, start using artificial intelligence (AI) to adjust prices for menu items in a fashion similar to Uber (NYSE: UBER). 

Originally, Wendy’s implied that prices would decrease or increase based on myriad factors, including weather, time, demand, location, and so on, and would shift multiple times each day.

Judging by the discussions on numerous social media websites, the idea was universally accepted as dreadful and the company that once went viral for its meme-inspired roast-filled marketing campaign on X became the target of a relentless meme assault due to its surge pricing plans..

The memes were largely focused on either the absurdity of the idea of bidding on burgers or not knowing how much a lunch would cost in an established fast-food restaurant.

The idea was deemed bad enough that some voices from the online investor community started recommending people short Wendy’s stock.

Wendy’s CEO reacts to backlash

Not taking a page from Kellogg’s (NYSE: K) book – where the CEO stuck to his cereal-for-dinner recommendation for lower-income households despite the backlash – Wendy’s CEO Kirk Tanner came out to clarify the issue.

According to Tanner, the idea – which will have its test run in 2025 – is not intended to raise the price of Wendy’s burgers in times of peak demand but rather to merely make it easier for the restaurant to offer appropriate discounts on appropriate menu items to customers.

Judging by the online reaction, people weren’t entirely convinced that the clarification wasn’t, in actuality, a u-turn intended to avoid a stock market slaughter like the one Bud Light and Target experienced in 2023.

Nonetheless, there was widespread celebration of the apparent victory in much the same form as the backlash – with memes.

Wendy’s stock price chart

Perhaps surprisingly, unlike the online communities, investors had a lukewarm reaction to the AI-driven menu idea. In fact, Wendy’s shares declined less than 5% in the immediate aftermath of the original announcement from approximately $18.42 to about $17.95 and started climbing again within a day.

Still, they appear to have reacted at least somewhat positively to the Wendy’s CEO’s backpaddling as, in the last 24 hours of trading, Wendy’s is 1.88% in the green, having closed at $18.45. 

Indeed, Wendy’s stock price weathered the social media pile-on from its surge burger debacle, as one netizen put it.

Despite this, the extended session trading indicates that there will be no significant pump as WEN is, at the time of publication, down 0.27%.

WEN 1-day stock price chart. Source: Google

While Wendy’s stock has been doing reasonably well in the short term, being 4.06% up in the last 7 days, its longer-term performance leaves much to be desired. Year-to-date (YTD), WEN is down 4.65%, and the 52 weeks leading up to February 29 saw Wendy’s shares decline as much as 16.89%.

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