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McDonald’s: Analysts Favor a ‘Buy’ Rating

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Jan. 24 2019, Updated 7:31 a.m. ET

Analysts’ recommendations

Among the 32 analysts covering McDonald’s (MCD), 78.1% recommend a “buy,” while 21.9% recommend a “hold.” None of the analysts recommend a “sell.” On average, analysts have set a 12-month target price of $195.65, which represents a return potential of 6.0% from its closing price of $184.57 on January 22.

On December 19, RBC raised its target price from $190 to $205, while Barclays raised its target price from $198 to $208. On December 17, JPMorgan Chase increased its target price from $180 to $182. In November, Morgan Stanley upgraded the stock from “equal weight” to “overweight.” Morgan Stanley increased its target price from $173 to $210.

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Peer comparisons

Among the 33 analysts covering Starbucks (SBUX), 48.5% recommend a “buy,” 48.5% recommend a “hold,” and 3.0% recommend a “sell.” On average, analysts have set a 12-month target price of $68.44 on the stock, which represents a potential upside of 4.7% from its stock price of $65.39.

Among the 25 analysts covering Wendy’s (WEN), 56.0% recommend a “buy,” while 44.0% recommend a “hold.” Analysts have set an average target price of $19.18 on the stock, which represents a potential upside of 14.8% from its stock price of $16.71.

Among the 16 analysts tracking Jack in the Box (JACK), 43.8% recommend a “buy,” while 56.3% recommend a “hold.” Analysts have set an average target price of $93.69 on the stock, which represents a potential upside of 16.7% from its stock price of $80.30.

Valuation multiple

As of January 22, McDonald’s was trading at a forward PE ratio of 22.4x compared to 20.6x before the company posted its third-quarter earnings on October 23. The increase in McDonald’s stock price drove its valuation multiple. McDonald’s is trading at a premium to Jack in the Box, which is trading at 16.7x. McDonald’s is trading at a discount to Starbucks and Wendy’s, which are trading at 23.7x and 25.2x, respectively.

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