Stephens Downgrades McDonald's (MCD) to Equal Weight; No Catalyst for Multiple Expansion
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(Updated - December 7, 2020 7:13 AM EST)
Stephens analyst James Rutherford downgraded McDonald's (NYSE: MCD) from Overweight to Equal Weight with a price target of $225.00 (from $250.00).
The analyst comments "MCD has performed admirably during the pandemic as it continues to speak to the consumer's desire for convenience, value, and familiarity. However, the stock is at 25x P/E, and our prior bull case was based on 30x P/E. Given the current setup, we don't see a catalyst for achieving that kind of multiple expansion. In the U.S., comps, we believe, are tracking to positive mid-single-digits QTD. We do expect some acceleration in Dec with McRib, but the final print likely will be close to Street's +4.9%. Beyond comps, we note that battle lines are again being drawn between MCD and franchisees after MCD informed franchisees last week that it would be shifting certain costs to the operators. In IOM we are expecting a 4Q slowdown with lockdowns hitting key markets. We are downgrading MCD from Overweight to Equal-Weight and lowering our target from $250 to $225."
Shares of McDonald's closed at $210.00 yesterday.
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