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Analysts Favor ‘Buy’ for McDonald’s

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Apr. 23 2019, Published 12:03 p.m. ET

Analysts’ expectations

Of the 29 analysts covering (MCD), 79.3% recommend “buy,” 20.7% recommend “hold,” and none recommend “sell.” Their 12-month target of $199.64 for MCD implies a 3.0% return from its April 22 price of $193.92. Since McDonald’s announced its fourth-quarter earnings on January 30, Telsey Advisory Group has raised its price target from $195 to $210, and Stephens has upgraded the stock from “equal weight” to “overweight.”

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Peer comparison

Of the 29 analysts covering Starbucks (SBUX), 41.4% recommend “buy,” 55.2% recommend “hold,” and 3.4% recommend “sell.” Their average 12-month target of $72.50 implies a 3.9% fall from its current price of $75.40.

Of the 23 analysts covering Wendy’s (WEN), 56.5% recommend “buy,” and 43.5% recommend “hold.” Their average 12-month target of $19.16 implies a 2.5% upside from its current price of $18.69.

Of the 14 analysts covering Jack in the Box (JACK), 42.9% recommend “buy,” and 57.1% recommend “hold.” Their average 12-month target of $91 implies a 17.4% upside from its current price of $77.49.

Valuation multiple

McDonald’s strong fourth-quarter performance and optimism surrounding its digital advancements appear to have boosted its stock and valuation multiples. As of yesterday, McDonald’s forward PE multiple had risen to 23.3x from 22.1x before the announcement of its fourth-quarter earnings. In comparison, Starbucks, Wendy’s, and Jack in the Box had forward PE multiples of 26.1x, 28.4x, and 16.1x, respectively.

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