What Happened?
Shares of diner restaurant chain Denny’s (NASDAQ:DENN) jumped 3.1% in the morning session after the company announced it was considering a plan to refinance its existing debt. The restaurant operator stated that the potential transactions would refinance nearly all of its existing debt, which was due in August 2026. At the end of the first quarter, Denny's reported total debt of $276.2 million. Such a move was likely viewed favorably by investors as it could lead to better terms and increased financial flexibility for the company. Adding to the positive sentiment, recent filings showed that institutional investors like Envestnet Asset Management had increased their holdings in the company, signaling growing confidence in the stock.
After the initial pop the shares cooled down to $4.19, up 0.1% from previous close.
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What Is The Market Telling Us
Denny’s shares are extremely volatile and have had 39 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 14 days ago when the stock dropped 3% as a lack of fresh catalysts allowed underlying investor concerns to take the forefront. The decline occurred in the absence of any specific company announcements or analyst rating changes. However, recent data indicates a rise in negative sentiment among investors. The percentage of the company's shares sold short, a common measure of bearish bets against a stock, has recently increased. This move comes amid lingering worries over the company's performance. Earlier in the year, Denny's management issued weak guidance for fiscal year 2025, projecting same-store sales to be anywhere from flat to down 2%. Analysts have also pointed to a challenging outlook, with the company facing declining system-wide same-restaurant sales and downward revisions to earnings estimates. Without positive news to change the narrative, these persistent concerns appear to be weighing on the stock.
Denny's is down 33.2% since the beginning of the year, and at $4.19 per share, it is trading 45.2% below its 52-week high of $7.65 from July 2024. Investors who bought $1,000 worth of Denny’s shares 5 years ago would now be looking at an investment worth $467.63.
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