Fast-food titan McDonald’s (MCD) remains a global powerhouse, operating more than 43,000 restaurants across over 100 countries. Yet even the golden arches can lose some shine when consumer spending softens. The stock is up only about 4% year-to-date, and sales momentum has cooled, with comp sales in the U.S. rising only 2.5%. Inflationary pressures in Europe have also cut into margins.
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To counter the onslaught, McDonald’s has doubled down on delivering value in multiple ways over the past year. In January, the company launched a nationwide McValue platform, reintroducing $1 items and expanding its popular $5 meal deal. By September, it had revived Extra Value Meals, offering eight discounted combos across breakfast, lunch, and dinner menus.
Chairman and CEO Chris Kempczinski highlighted the success of these efforts in August, stating, “McValue is working. Our 6% global Systemwide sales growth this quarter is a testament to the power of compelling value, standout marketing, and menu innovation.”
Still, while international growth remains solid, U.S. consumer pressure and lower average checks have made it harder to sustain strong same-store sales. At current levels, the risk/reward looks balanced, and I maintain a Neutral stance on the stock.
Steady Unit Growth — But Weighted to Lower-Value Markets
McDonald’s global expansion remains one of its most consistent strengths. Since 2017, global unit count has increased at a 2.2% CAGR, led by international markets. The International Operated Markets (IOM) and International Developmental Licensed (IDL) segments have expanded by 0.6% and 5.8% annually, respectively, with IDL now accounting for over 19,000 locations — nearly half of McDonald’s global footprint.
Management expects 70% of net new restaurant growth from 2024 to 2027 to come from IDL markets, where average unit volumes (AUVs) are lower. While this strategy will fuel mid-single-digit (MSD) unit growth, in my opinion, it also skews toward lower revenue per restaurant, limiting potential top-line leverage.
In short, international expansion remains solid, but most of the growth will come from markets with thinner margins and smaller average checks, muting the potential EPS impact.
MCD’s Value Push Wins Wealthier Diners, But Not Core Customers
The U.S. market, which accounts for roughly 40% of McDonald’s operating income, continues to face meaningful pressure. Management has reported double-digit traffic declines among lower-income consumers for three straight quarters—a troubling trend that hasn’t reversed, even with a renewed focus on value. The impact of McDonald’s array of value promotions and combo discounts of about 15% versus à la carte pricing appears limited so far. November’s earnings call should provide clarity, however.
History offers similar lessons. In both 2018 (during the $1–$2–$3 value push) and 2024 (with the initial $5 Meal Deal), traffic still declined despite aggressive promotions. U.S. same-store sales grew just 2.5% in 2018 and 0.2% in 2024, suggesting that value menus may not fully offset the check dilution they cause.
The current affordability push could help McDonald’s capture share from fast-casual rivals as middle- and upper-income consumers trade down, but lower-income households remain hesitant. Spending among U.S. households earning under $40,000 has fallen 80 basis points since Q4 2024, while higher-income spending rose 130 basis points.
This divergence implies that McDonald’s is winning share from wealthier consumers rather than reigniting visits from its lower-income base—a dynamic that may cap near-term same-store sales growth despite the company’s renewed value strategy.
McDonald’s Digital and Menu Moves Offer Stability
McDonald’s continues to innovate through digital engagement and menu updates. The company’s loyalty program remains a strong driver of frequency — loyalty members visit 2.5x more often after joining. Management aims to reach 250 million loyalty members globally by 2027, though about 44% of that growth will likely come from China, where digital penetration is already near 90%.
That means most incremental upside may come from the U.S., where loyalty currently accounts for about 25% of system sales, and could rise by another 300 basis points over the next two years. Menu innovation — particularly in chicken — remains another focus area, though intense competition limits how much share McDonald’s can capture in that category.
In short, these initiatives are encouraging but incremental. They may help stabilize SSS growth but are unlikely to deliver a meaningful breakout until broader consumer sentiment improves.
McDonald’s Valuation Sits in the Middle of the Road
McDonald’s trades at a P/E of 25.2x, above the sector median of 19.8x but below its five-year historical average of 28.2x. Its EV/EBITDA multiple of 18.6 is also above the industry average (11.2) but not far from its own long-term range (20.2).
In summary, McDonald’s doesn’t appear cheap, but it’s not significantly overvalued either. Based on my valuation models — including P/E, DDM, and a five-year DCF growth exit — I estimate a fair value of around $280 per share, suggesting roughly 5% downside from current levels. Overall, the stock looks fairly valued at this stage.
Is McDonald’s Stock a Buy or a Sell?
According to leading Wall Street analysts tracked by TipRanks, McDonald’s holds a Moderate Buy consensus rating based on 27 analyst reviews: 13 Buys, 13 Holds, and one Sell. The average stock price target stands at $322.43, implying almost 9% potential upside over the coming year.
Analysts broadly agree that McDonald’s remains a high-quality, defensive brand, but see limited near-term catalysts for upside given consumer softness and value-driven pricing pressures.
McDonald’s Strength Endures Under a Glass Ceiling
McDonald’s remains one of the most reliable and resilient restaurant operators globally, backed by strong brand equity, broad geographic diversification, and steady unit growth. However, near-term upside appears limited as the company faces soft U.S. demand, lower-income spending pressure, and margin dilution from heightened value promotions.
While international expansion, loyalty growth, and menu innovation should help cushion some of the impact, they are unlikely to drive significant acceleration in results. With the stock trading near fair value and same-store sales momentum easing, I maintain a Neutral outlook on McDonald’s shares over the coming quarters.