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Why Nomura and BTIG Raised Their Target Price for McDonald’s

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Analysts’ recommendations

With McDonald’s (MCD) set to launch its new Dollar Menu on January 4, 2018, Mark Kalinowski of Nomura-Instinet raised the target price from $180 to $190 on January 2, 2018. On the same day, Peter Saleh of BTIG raised the target price from $175 to $200.

Kalinowski expects McDonald’s SSSG (same-store sales growth) to continue to grow—especially in 2H18 after the nationwide rollout of fresh, never-frozen beef in its Quarter Pounder and Signature Crafted burgers. He also increased the EPS (earnings per share) expectations for 2017, 2018, and 2019. Currently, he expects the company to post an EPS of $6.55 in 2017 from an earlier estimate of $6.53, $7.05 in 2018 from an earlier estimate of $6.93, and $7.65 in 2019 from an earlier estimate of $7.53.

Saleh expects the launch of the new Dollar Menu to be a major driving force behind McDonald’s SSSG. He raised the SSSG estimates for 2018 and 2019. Currently, he expects McDonald’s to post SSSG of 4.1% in 2018 from his earlier estimate of 3.0% and 3.9% in 2019 from his earlier estimate of 3.3%.

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Target price

On average, analysts expect McDonald’s stock price to reach $182.54 in the next 12 months, which represents a return potential of 5.4%. Of the 35 analysts that follow McDonald’s, 71.4% are recommending a “buy” and 28.6% are recommending a “hold.” None of the analysts are favoring a “sell” option for McDonald’s.

The target price and return potential of McDonald’s peers are as follows:

  • Wendy’s (WEN) – target price of $16.84, which represents a return potential of 3.2%
  • Jack in the Box (JACK) – target price of $109.73, which represents a return potential of 13.9%
  • Restaurant Brands International (QSR) – target price of $74.85, which represents a return potential of 19.9%

Next, we’ll discuss McDonald’s stock performance.

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