UBS has issued a ‘buy’ rating for McDonald’s (MCD), predicting a stock rebound driven by menu overhauls, marketing initiatives, and the company’s inherent stability. Despite recent underperformance and geopolitical concerns, analysts see significant upside potential, with a price target of $365.
McDonald's Poised for Rebound as Menu Overhaul and Marketing Push Impress UBS
McDonald's (MCD) shares are expected to bounce back as the fast-food giant implements strategic changes to boost sales both domestically and internationally, according to a recent report from UBS. The bank maintains a 'buy' rating on the stock, with a price target of $365, representing a potential 27% upside from Friday's closing price.
UBS analyst Dennis Geiger highlighted the attractive risk/reward profile of MCD shares, citing catalysts that could drive market share gains and strengthen U.S. sales growth. Despite ongoing macroeconomic volatility, the company's defensive characteristics are expected to provide earnings stability.
Over the past three months, McDonald's stock has declined by 11%, underperforming the broader market, partly due to investor concerns about the potential impact of geopolitical tensions, particularly the Iran war, on its operations in the U.S., Europe, and other regions.
However, investor discussions with UBS suggest more conservative first-quarter same-store sales forecasts of roughly 3% to 3.5% for U.S. and international operated markets, compared to analysts' expectations of 4% and 3.8% respectively.
UBS points to several key initiatives driving their optimistic outlook. The launch of the McValue 2.0 menu in April, designed to offer more affordable options, is expected to resonate with customers. Additionally, the company's new beverage platform and a menu collaboration with the Netflix series KPop Demon Hunters are seen as near-term catalysts.
Geiger emphasized that McDonald's remains well-positioned globally and is actively implementing initiatives to strengthen its performance. He believes solid execution of sales plans, focusing on value, marketing, and menu innovation, will continue to drive customer engagement worldwide.
The consensus on Wall Street largely aligns with UBS's assessment. Out of 38 analysts covering McDonald's, 21 have a 'buy' or 'strong buy' rating, according to LSEG data. McDonald's is scheduled to report its first-quarter earnings on May 7th.
