Today, Stephens upgraded McDonald’s from “equal weight” to “overweight,” stating that lower expectations for McDonald’s in 2019 provided room for positive surprises, reported CNBC. Also, Stephens has set a 12-month price target of $200 on the stock, which represents an upside potential of 11.2% from its February 15 closing price of $179.97.
In a note to investors, Will Slabaugh of Stephens said, “We believe MCD’s core U.S. business is accelerating and set to show upside to consensus estimates for [first quarter 2019 and the full year].”
Other analysts’ recommendations
Of the 30 analysts who follow McDonald’s, 80% say “buy” and the remaining 20% say “hold.” None of the analysts favor a “sell” recommendation. On average, analysts have set a price target of $197.67, which represents a return potential of 9.9% from MCD’s February 15 closing price.
The upgrade by Stephens appears to have increased investors’ confidence. McDonald’s was trading ~0.7% higher in the morning hours of trading today. Year-to-date, McDonald’s has returned 1.4% as of February 15. Peers Starbucks (SBUX), Wendy’s (WEN), and Jack in the Box (JACK) have returned 9.8%, 3.4%, and 15.3%, respectively. The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), has returned 11.2%.
McDonald’s posted its fourth-quarter earnings on January 30. You can read our analysis in Why McDonald’s Q4 Earnings Weren’t Impressive.