McDonald’s Corporation (NYSE: MCD) is the restaurant chain that is at the heart of America. It’s now global chain with about 42,000 locations, and the fast food giant is expected by some to grow to 50,000 units before the end of this decade. There is not a single person you would meet that would tell you McDonald’s is healthy for you. And in this post-inflation era, good luck finding anyone who would say McDonald’s is still a cheap destination for a family of 4.
…
Oggonomics observed that the McDonald’s fourth quarter earnings report missed analyst expectations. That’s generally bad news for investors, but McDonald’s shares rose by 4.7% to $308.42 on Monday’s post-earnings reaction. And it was up over 0.5% at $310.00 late on Tuesday.
…
The driving force was that McDonald’s total same-store sales rose by 0.4% (Wall Street was expecting -1.1%) even as the U.S. same-store figure was down 1.4%. The earnings report of $2.83 EPS (versus $2.85 EPS expected) was simply deemed to be “good enough” considering the E. coli outbreak. And the value menu may have a lower ticket per visit, but customers are eating it up.
…
McDonald’s now has a market cap of $220 billion. One driving force for the bullishness of Wall Street is that McDonald’s chains are 95% franchised. That means it is more of a food distributor with a fixed customer base, and the independent operators are on the hook for paying the workers and paying the bills to operate each one of those franchises.
…
On top of the McDonald’s model allowing the company to focus almost solely on food consistency, it has raised its dividend for 48 consecutive years since it first started paying a dividend in 1976.
…
The big question from Oggonomics is whether or not McDonald’s should be a strategic stocks to buy any time its stock price gets battered or whether long-term investors should just decide to buy and hold the stock forever. That’s not investment advice by the way — and Oggonomics maintains no formal rating or in-house price target on McDonald’s.
…
Wall Street has by and large given the company a pass entirely on its E. coli outbreak impact and is looking forward to a higher stock price in 2025 and beyond. These are the post earnings ratings and price target changes alphabetically by firm:
- BofA Securities target raised to $316 from $312 – Maintained Neutral
- Baird target raised to $310 from $305 – Maintained Neutral
- Barclays target raised to $350 from $347 – Reiterated Overweight
- BMO Capital Markets target raised to $340 from $335 – Reiterated Outperform
- Citigroup target raised to $360 from $336 – Reiterated Buy (see recent hikes below)
- JPMorgan target raised to $300 from $280 – Reiterated Overweight
- KeyBanc target raised to $335 from $320 – Reiterated Overweight
- Morgan Stanley target raised to $340 from $336 – Reiterated Overweight
- Truist Securities target cut to $340 from $342 – Maintained Buy
- Wedbush target raised to $330 from $320 – Reiterated Outperform
…
Of the reports after earnings, there have been at least 10 firms raising their price targets. Only 1 real cut was seen. Of the price target changes that have been tracked, the high is $360 and the low is $300 — and most firms still have their ratings as positive (Buy/Overweight/Outperform).
It’s also important to know what analysts were saying in their ratings in the month ahead of earnings. Wall Street had been altering its year-end price targets before the earnings report:
- (2/04) Target cut to $290 from $297.00 at Piper Sandler (maintained Neutral)
- (1/28) Target raised to $336 from $334 at Citigroup (reiterated Buy)
- (1/24) Target cut to $320 from $330 at KeyBanc Capital Markets (maintained Overweight)
- (1/21) Target cut to $336 from $340 at Morgan Stanley (maintained Overweight)
- (1/10) McDonald’s upgraded to Buy from Neutral and target raised to $334 from $311 at Citigroup
…
Here is an interesting factoid as food for thought. The $221 billion market cap for McDonald’s is nearly the same as Starbucks ($126 billion), Chipotle ($76 billion) and Yum ($40 billion) combined. Its market cap is also worth twice as much as the next 20 public restaurant chains combined — including Darden, Domino’s, Cava, Texas Roadhouse, Dutch Bros, Wingstop, Brinker, Shake Shack, Wendy’s, Cracker Barrel and so on.
…
McDonald’s stock has risen over 200% in the last decade alone. Analysts are looking for nearly 10% upside by the start of 2026.
