McDonald’s Corporation (MCD) Is Turning around Things

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It does not matter when an optimist projects an optimistic picture for McDonald’s Corporation (NYSE:MCD). However, a skeptic projecting a buoyant position matters the most for investors or the markets. That is what is happening in this case. Nomura analyst, Mark Kalinowski, was well-known for disclosing a survey of franchisees on a quarterly basis, and some of them were termed as scathing attack on the chain of restaurant in the past. However, he has made a change of course and is positive now on the company.

Rating Upgraded

The brokerage also upgraded the shares of McDonald’s Corporation (NYSE:MCD) to a rating of ‘Buy’ from neutral. The analyst has kept a price objective of $135, which meant that there is an upside potential of 13% based on the closing price on Tuesday. Kalinowski believes that the chain of restaurant firm would have witnessed 3.5% growth in its same-store sales in the fourth quarter in the United States. That would make the significant growth in the last 14 quarters. The analyst also said that his checks indicated that the company has regained some of its lost ground in the short term.

Another significant factor pointed out by him was that at a time when most of the big segments of the restaurant industry were witnessing a sequential drop in the same-store sales, the company turned out an impressive show. Though there were some skeptics about the company’s all-day breakfast initiative that was launched in early October, the brokerage said that it tilted in favor of the company. However, investors need to wait until January 25 to determine the extent of breakfast hours impact on its sales in the fourth quarter. FactSet said that approximately 55% of the sell-side analysts have rated the shares of McDonald’s Corporation (NYSE:MCD) to Hold and most of the analysts also suggested to remain on the sidelines.

Fast-Food Price War Heating Up

It seems that the year 2016 has started with a price war among the fast-food firms. Burger King launched a fresh five for $4 deal, which included a small French fries, bacon cheeseburger, a chocolate chip cookie, a small drink, and four-piece chicken nuggets. The deal came on the heels of McDonald’s Corporation (NYSE:MCD) launching McPick 2. For $2, customers get any two of its McDouble or McChicken or Mozzarella sticks or small fries. Pizza Hut also joined the fray with its $5 Flavor Menu.

There are two primary reasons for the increased attention on combo menu. While customers were interested to conserve money and turns to bargain meals, the second factor was that it was competing for the best value chain position and still makes a profit. McDonald’s McPick2 was part of its wider strategy to re-establish its permanent national value platforms. The success of it would mean a big blow to the others in the industry.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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