Meme stock magic reappears! Wendy's (WEN.US) surges before trading, retail investors may be facing a short seller showdown.

After multiple users on the Reddit forum WallStreetBets called on retail investors to buy Wendy's (WEN.US) stock, the poorly performing fast food chain saw a surge in its stock price in pre-market trading. Wendy's stock surged over 36% at one point before the market opened on Wednesday, but by the time of this writing, the gain had narrowed to over 20%. If this increase can be maintained until the close of the market on Wednesday, it will be the strongest single-day rally for the stock in over five years. Currently, retail investors are increasingly focusing their attention on Wendy's. According to data tracked by Swaggy Stocks, in the past 24 hours, the stock has become the second most mentioned stock on the Reddit forum WallStreetBets. On another retail investor forum Stocktwits, discussions about the stock have surged by 1348% in the past seven days. Wendy's stock shares characteristics similar to "meme stocks" from previous years like GameStop Corp. Class A (GME.US) - high short interest and a recognizable brand that easily gains support from retail investors. According to data from S3 Partners, about 23% of the company's freely-traded shares are currently held short. If the stock price continues to rise and forces short sellers to cover their positions, a "short squeeze" is highly likely. From a valuation perspective, the stock currently seems quite cheap, with a projected P/E ratio of only about 11 times for 2026. Some retail investors in the forum have said, "Wendy's market cap is only $1.18 billion, with a P/E ratio of only 8 times. If the stock price is pushed to $50 per share, the total market cap would be only about $10 billion, corresponding to a P/E ratio of about 60 times. It might seem high, but in the case of a full short squeeze, who's to say it's not possible? The market has seen crazier things. With short interest at 30%, we've had enough of short sellers. They better cover soon, otherwise they might be completely wiped out." At the same time, retail investors also see Wendy's as a "turnaround stock" and a "recovery concept stock". Over the past year, Wendy's stock has dropped by about 50% due to impacts from high inflation and decreased consumer spending on dining out. The company's same-store sales in the US declined by 7.8% in the first quarter, further worsening from a 2.8% decline in the same period last year. However, in May of this year, Wendy's appointed Robert Wright as the new CEO, succeeding Ken Cook who was the interim CEO. Earlier, there were reports that Trian Fund Management, owned by Nelson Peltz, was seeking investor support to launch a takeover bid for the fast food chain. As this struggling fast food company attempts a full transformation, these developments quickly became the focus of the market's attention. While changes in management may affect investor sentiment, the significant increase in Wendy's stock price seems more like a sudden burst of enthusiasm from retail investors.