On Thursday, Morgan Stanley (NYSE:MS) adjusted its outlook on McDonald's Corporation (NYSE:MCD) shares, reducing the price target to $300 from the previous $312. The firm maintained its Overweight rating on the fast-food giant's stock. The adjustment comes amid anticipation of a challenging second-quarter earnings season for the sector.
The analyst noted that McDonald's has been a frequent topic of discussion due to concerns about its ability to regain a competitive edge in value offerings. Despite the introduction of a $5 meal on June 25, high-frequency data indicates that the promotion has not significantly influenced customer demand. This trend reflects a broader issue within the industry, where various strategies to engage consumers have not effectively stimulated demand.
The revision of the price target is accompanied by lowered financial forecasts for McDonald's. The analyst has marked down projections for the second and third quarters, as well as a slight over 2% reduction for the year's expectations, taking into account factors such as foreign exchange rates, same-store sales, unit growth, and restaurant-level margins. The current sentiment suggests that the market may have already accounted for the potential shortfall in McDonald's upcoming quarterly results.
The report also hints at ongoing risks and debates regarding the second half of the year's performance trends. Despite the near-term challenges indicated by the data, Morgan Stanley's Overweight stance suggests a belief in the stock's potential value over the longer term.
The firm anticipates that while the second-quarter commentary from McDonald's may not provide much reassurance, the potential for a quarterly miss is already widely recognized by investors.
In other recent news, McDonald's Corporation has seen a series of significant developments. Truist Securities adjusted its price target for McDonald's shares from $320.00 to $300.00, maintaining a 'Buy' rating, following an analysis of the company's second-quarter performance.
The company's U.S. system sales reached approximately $13.5 billion, falling slightly short of the consensus estimates. Despite this, McDonald's adjusted EBITDA for the second quarter of 2024 was minimally impacted.
Furthermore, Wells Fargo (NYSE:WFC) reiterated its Overweight rating on McDonald's with a steady price target of $300.00, noting potential growth drivers such as the brand's consistent value offerings, a possible turnaround in Paris, and a collaboration with Krispy Kreme (NASDAQ:DNUT). UBS also maintained a Buy rating on McDonald's, expressing optimism about the fast-food giant's potential for sales recovery in the second half of 2024 and into 2025.
In addition, Goldman Sachs (NYSE:GS) initiated a Neutral rating on McDonald's stock, acknowledging potential risks associated with McDonald's new value menu initiative, but expressing confidence in the company's significant scale and digital capabilities.
Lastly, McDonald's lost a trademark dispute in the General Court of the European Union, ruling that the company does not hold the rights to use the "Big Mac" name for poultry products.
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