Why Are Analysts Favoring ‘Hold’ Recommendations for McDonald’s?



Analysts’ recommendations

On January 24, 2017, McDonald’s (MCD) was trading at $121.05. This share price may have already factored in the estimates we’ve discussed 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 McDonald’s stock price fell 0.72% on the announcement of its 4Q16 earnings, analysts have raised their consensus price target for the stock from $128.1 to $129.5. The new price target represents a return potential of 7% from MCD’s current level.

MCD’s better-than-expected global same-store sales growth (or SSSG) and the initiatives it’s implemented to improve its SSSG in 2017 appear to have compelled analysts to raise their consensus price target.

The return potentials of McDonald’s peers over the next 12 months are as follows:

  • Jack in the Box (JACK) has a target price of $119.5 and a return potential of 10.5%.
  • Restaurant Brands International (QSR) has a target price of $50 and a return potential of 2%.
  • Wendy’s (WEN) has a target price of $13.01 and a return potential of -5.0%.
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Analysts’ ratings

Of the 32 analysts following McDonald’s, 41.9% have given it “buy” recommendations, 54.9% have given it “hold” recommendations, and 3.2% have given it “sell” recommendations. As analysts raise their target prices for the next 12 months, the price of the stock may also rise, and vice versa.

A stock’s price being lower than its target price doesn’t mean that it’s an automatic “buy.” Before investing, make sure to carefully analyze the various metrics we’ve covered in this series.


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