Analysts Favor a ‘Buy’ Recommendation for McDonald’s
McDonald’s (MCD) management worked to enhance customers’ experience and improve the quality of its menu items. The initiatives appear to have compelled analysts to raise their target price. As of July 13, 2017, analysts expect McDonald’s stock price to touch $159.4 in next 12 months, which represents a rise of 2.8% from its current stock price.
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The target price and return potentials of McDonald’s peers over the next 12 months are as follows:
- Jack in the Box (JACK) – target price of $115.79 with a return potential of 21.6%
- Restaurant Brands International (QSR) – target price of $56.71, which implies a fall of 7.8% from its current price
- Wendy’s (WEN) – target price of $16.46 with a return potential of 5.2%
Of the 33 analysts that follow McDonald’s, 66.7% recommended a “buy ” and 33.3% recommended a “hold.” None of the analysts recommended a “sell.” On June 20, 2017, Cowen upgrade the stock to “outperform” from “market perform.” It also raised its target price from $142 to $180. The new target price represents a return potential of 16.1%. On May 3, 2017, Goldman Sachs upgraded the stock from “neutral” to “buy.” It also raised the target price from $126 to $153.
McDonald’s stock moves in tandem with analysts’ estimates. When analysts raise the target price, the stock moves up and vice versa. When the stock price is lower than analysts’ target price, it doesn’t mean an automatic “buy.” Investors should carefully analyze the various parameters that we discussed in this series before making any investment decisions.