Analysts raise targets on McDonald's stock after Investor Day, discuss CosMc's

December 7, 2023 8:35 AM EST
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McDonald's (NYSE: MCD) announced that it is set to launch the inaugural CosMc's location in Bolingbrook, Illinois, this week.

The fast-food giant aims to open 10 CosMc's outlets, with nine planned for Texas, by the end of 2024 as part of a testing phase. McDonald's will then analyze data over the following year to determine the potential expansion of this small-format chain.

“This is a $100 billion category growing faster than the rest of the [informal eating-out segment] and with superior margins,” McDonald’s CEO Chris Kempczinski told attendees during yesterday’s Investor Day.

“Let me emphasize again, we’re talking about 10 stores. The big story isn’t about CosMc’s, per se. The big story is what it says about McDonald’s and our potential. To think, a little over a year ago, this was an idea, and this week we’re opening the first test site,” he added.

CosMc's are designed with a smaller real-estate footprint compared to standard McDonald's locations. The testing phase incorporates various layouts, including the exploration of multiple drive-thru lanes.

To enhance service efficiency, customers using credit cards will have the option to make payments directly at the drive-thru speaker.

TD Cowen analyst Andrew Charles hiked the price target by $25 to $325 per share on MCD after attending yesterday’s event.

“While U.S. restaurant industry traffic will presumably see continued headwinds in 2024, we like MCD's prospects to buck the trend given the brand's scale that benefits value, advertising, digital and leveraging best practices,” he said.

JPMorgan analyst John Ivankoe credited CEO Kempczinski for the turnaround he is facilitating at the fast-food retail chain.

“Kempczinski has clearly compiled an impressive team of deep backgrounds both within and outside of MCD and has made his mark on the modernization of a company whose leadership of the past used to feel much more that of legacy, tenure, and silos.”

Ivankoe also lifted the price target, going to $300 from the prior $278 per share.

By Senad Karaahmetovic

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JPMorgan, Cowen & Co, Senad Karaahmetovic