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McDonald’s Delays Reopening Dining Rooms, COVID-19 Cases Spike

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The COVID-19 outbreak continues to impact the foodservice industry. Amid the recent surge in COVID-19 infections, McDonald’s (NYSE:MCD) management decided to delay reopening its dine-in restaurants for 21 days, as reported by MarketWatch. Management has advised the restaurants that have already opened their dining spaces to seek guidance from local and state officials about continuing the service. Restaurants started reopening their dining spaces in May. Approximately 2,200 of the 14,000 restaurants have already been offering dining services.

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On Wednesday, the US reported 48,400 new cases. The amount is the fifth single-day record in the last eight days. MarketWatch said that as the cases increase, many states and cities have been curtailing their reopening plans. On Wednesday, California closed all of its dining spaces for at least 21 days in 19 counties. New York decided to delay reopening its dining rooms from its previous date of July 6.

McDonald’s stock falls

The announcement about delaying the reopening of dining rooms didn’t sit well with investors. On Wednesday, McDonald’s was trading 0.8% lower in the after-hours of trading. Meanwhile, the company has lost 6.6% of its stock value this year as of July 1. The expectation of fewer sales due to temporary closures and limited operations, higher expenses due to increased cleaning and employee hygiene, and the decline in the company’s EPS during the first quarter impacted the company’s stock price. However, the company has faired better than its peers. During the same period, Starbucks (NASDAQ:SBUX) and Dunkin’ Brands (NASDAQ:DNKN) have fallen by 15.8% and 12.4%, respectively. Meanwhile, the S&P 500 Index has fallen by 3.6% during the same period.

Analysts’ recommendations and price targets

On June 16, McDonald’s management provided an update on reopening restaurants and its SSSG in the second quarter as of May 31. The company announced that it had opened 95% of its restaurants across the world. Most of the restaurants only operated their drive-thru and delivery services. Until May 31, the company’s global SSSG in the second quarter had declined by 29.8%.

Since the announcement, SunTrust Robinson, Jefferies, Cowen, Stifel, Piper Sandler, and BMO have all raised their target prices. As of July 1, analysts’ consensus target price was $207.28. The target price represents a 12-month return potential of 15.3%. Overall, Wall Street is bullish on the stock. Among the 35 analysts, 74.3% recommend a “buy,” while 25.7% recommend a “hold.” None of the analysts recommend a “sell.”

Read McDonald’s or Starbucks, Which Is a Better Buy? to learn more about the companies’ growth prospects.

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