uploads///McDonalds Stock

McDonald’s Stock: Analysts Worry after CEO Exit


Nov. 5 2019, Updated 11:20 a.m. ET

McDonald’s (MCD) stock fell 2.7% on Monday. Notably, the company’s board fired president and CEO Steve Easterbrook on Sunday. Easterbrook was fired due to violating the company’s policy about having a consensual relationship with an employee.

Chris Kempczinski, who focuses on McDonald’s domestic operations, is the company’s new CEO. The company’s chief people officer, David Fairhurst, also left.

The abrupt shakeup in top McDonald’s management made investors and analysts worried about whether the company will sustain growth under the new leadership. The stock has doubled since Easterbrook took charge of the company in March 2015. On Monday, Market Realist analyst Amit Singh wrote that Easterbrook turned the company around. Singh noted that when Easterbrook became the CEO, McDonald’s was struggling with weak traffic and comps.

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Analysts worry about McDonald’s stock

Most of the analysts are concerned that the sudden management shakeup could hurt McDonald’s stock price in the near term. They’re worried about whether the new leadership will be able to maintain Easterbook’s long-term strategy of investing in technology and new markets to boost sales.

Several analysts lowered their target price on the stock on Monday. Notably, Miller Regan of Piper Jaffray was the only analyst that downgraded the stock. The analyst lowered the rating on McDonald’s stock to “neutral” from “overweight,” according to a Reuters report on Monday.

In a note to clients, Regan wrote, “Our experience leads us to take a more cautionary view noting the potential lack of momentum and time involved in formalising a new team.” The analyst said that the sudden management change could disrupt the company’s operations. Regan lowered his target price on McDonald’s stock by $29 to $195.

Citigroup (C) and MKM Partners have lowered their respective target prices on the stock. Citigroup cut the target price by $5 to $216, while MKM lowered it by $15 to $225.

A few other research firms are concerned about Easterbook’s sudden departure. However, they maintained their ratings and target prices. On Monday, UBS analyst Dennis Geiger said, “Today’s news likely adds uncertainty to investors’ list of concerns,” according to a Business Insider report.

In a note to clients, Cowen wrote, “We expect Steve Easterbrook’s departure to weigh on MCD shares,” according to the Business Insider report. UBS has a “neutral” rating on McDonald’s stock, while Cowen has an “outperform” recommendation. UBS and Cowen kept their target prices unchanged at $212 and $230, respectively.


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