McDonald's Corp (NYSE:MCD, ETR:MDO) presents a compelling buying opportunity on recent share weakness, analysts at Jefferies believe, citing near-term same-store sales acceleration and medium-term unit growth.
The analysts maintained their price target of $360 on ‘Buy’-rated McDonald’s, implying upside of 19% from Thursday’s closing price of about $303.
The analysts see the near-term acceleration of same-store sales and medium-term unit growth as key stock drivers for McDonald’s to narrow the current valuation gap when compared to its peers KFC and Taco Bell parent Yum Brands and Domino’s Pizza.
Analysts set a $360 price target on the stock, citing potential for multiple expansion as it trades at 16.5 times estimated 2025 enterprise value to EBITDA, below the roughly 18 times average for peers with similar growth prospects.
Upside in results could push the stock closer to $400, they believe.
Despite a soft first quarter and ongoing pressure on lower-income consumers, Jefferies says McDonald’s is managing well by balancing value, innovation, and marketing.
“Foot traffic and card data suggest a strong April, driven by the Minecraft movie promotion, on top of momentum in the $5 meal deal,” the analysts wrote.
They project US same store sales growth of 4% in the second quarter, ahead of the Street consensus at 2.5%, citing new product introductions and promotions as key drivers.
“McCrispy Strips launched May 5, S’mores McFlurry launched June 10, chicken Snack Wrap returns July 10, and more innovation to come in the second half to help accelerate same store sales,” they wrote.
They also anticipate upside in the back half of the year from meal deals and potential reintroduction of popular menu items such as the Chiken Big Mac, introduced last October.
Other reasons for optimism about McDonald’s include strong international performance, more agile global marketing and menu innovation, and the brand’s enduring advantages in scale, supply chain, and modernized stores.
Jefferies expects global unit expansion to accelerate, supported by steady low-to-mid-single-digit sales growth. Analysts forecast mid- to high-single-digit revenue and operating profit growth, along with double-digit earnings growth, backed by strong free cash flow, high operating margins, and room for further efficiency in overhead spending.