Investment firm Citi (C) has raised its price target for McDonald’s (MCD) to $381 (the highest target among Wall Street analysts) while maintaining a Buy rating. Indeed, 4.5-star analyst Jon Tower explained that the fast-food giant is benefitting from several short-term factors, including strong value-based promotions, easier year-over-year comparisons, and the potential for McDonald’s stock to be valued at a higher price-to-earnings multiple.
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As a result, these factors suggest that the stock may have more room to climb in the near term. Tower also pointed out that McDonald’s long-term outlook seems strong, thanks to a number of growth drivers. These include the launch of energy beverages, ongoing restaurant remodels, and a faster pace of opening new locations. Together, these strategies are expected to lead to multi-year growth, which should give investors more confidence in McDonald’s ability to maintain its leadership in the fast-food industry.
In addition, McDonald’s is putting pressure on competitors by aggressively pricing its menu. Tower said this could become a long-term advantage if the company chooses to keep pushing value options. This is because rival chains are seeing major drops in customer traffic at levels not seen since the height of the 2008 financial crisis. Therefore, more competitors may be forced to shut down locations, which would create an opportunity for McDonald’s to gain even more market share.
Is MCD Stock a Good Buy?
Overall, analysts have a Moderate Buy consensus rating on MCD stock based on 13 Buys, 12 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average MCD price target of $322.40 per share implies 5.8% upside potential.
