On July 18, McDonald’s (MCD) was trading at $123.8. The share price may have already factored in the estimates that we discussed previously in this series. In this article, we’ll look at analysts’ recommendations and estimated target prices for the stock over the next 12 months.
Although 1Q16 results were better than expected, concerns about the deceleration in same-store sales growth in the US burger industry, and analysts’ expectation that it will be hard for McDonald’s to post same-store sales growth, led to a decline in McDonald’s share price. These concerns also have prompted analysts to lower their price targets for the next 12 months to $130.8 from three-month-earlier estimates of $131.5. The new estimate represents a return potential of 5.7%.
On the higher side, John D. Staszak of Argus Research estimates the stock will touch $144, which represents a return potential of 16.3%. On the lower side, Karen Holthouse of Goldman Sachs has forecasted $109, which would be a fall of 12% from the current price.
The return potentials of McDonald’s peers over the next 12 months are as follows.
According to a Bloomberg survey, 42.4% of analysts give McDonald’s a “buy” recommendation, 51.5% give it a “hold” recommendation, and 6.1% give it a “sell” recommendation. As the analysts raise their target prices for the next 12 months, the price of the stock may also rise, and vice versa.
A lower share price—that is, lower than the target price—doesn’t mean you should automatically buy a stock. Before investing, you should carefully analyze the various metrics we’ve covered in this series.