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Starbucks and McDonald’s: How Valuation Multiples Stack Up

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Jun. 12 2019, Published 2:48 p.m. ET

Valuation multiple

The surge in the stock price of both Starbucks (SBUX) and McDonald’s since the beginning of this year has led to an increase in their valuation multiples. As of June 11, Starbucks was trading at a forward PE multiple of 27.4x compared to 23.5x at the beginning of this year. In comparison, McDonald’s was trading at a forward PE multiple of 24.2x on June 11 compared to 21.6x at the beginning of this year.

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Analysts’ recommendations

Since the announcement of McDonald’s first-quarter earnings on April 30, Barclays, SunTrust Robinson, BMO, J.P. Morgan, Cowen and Company, BTIG, Piper Jaffray, and Stifel have all raised their price targets for MCD. Overall, 77.4% of the total 31 analysts that follow McDonald’s have given a “buy” rating for the stock, while the remaining 22.6% are in favor of a “hold“ recommendation. On average, analysts have a 12-month price of $216.32 on McDonald’s, which represents a fall of 6.4% from its stock price of $203.26 as of June 11.

Since the announcement of Starbucks’s first-quarter earnings on April 25, BMO, Piper Jaffray, Wedbush, Cowen and Company, and Morgan Stanley have raised their price targets. However, Wells Fargo downgraded the stock from “outperform” to “market perform” and lowered its price target from $83 to $80. Overall, 60% of 30 analysts that follow Starbucks have given it a “buy” rating, while 36.7% are recommending a “hold,” and 3.3% are recommending “sells.” On average, analysts have a 12-month price target of $78.52 on Starbucks, which implies a fall of 4.7% from its stock price of $82.37.

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