McDonald's is under pressure due to 'deteriorating industry conditions'
- McDonald's is the worst performer on the Dow Friday.
- A team of analysts at RBC Capital Markets downgraded the stock on "deteriorating industry conditions" and disappointing value menu sales.
- Still, the company's long-term prospects remain strong.
- Watch the stock in real time here.
Shares of McDonald's are down almost 5% Friday after a team of analysts at RBC Capital Markets warned of a dim outlook for the fast-food industry.
The team of analysts led by David Palmer downgraded the stock, and lowered its price target to $170 a share from $190, citing "deteriorating industry conditions and a disappointing early sales impact from the $1, $2, $3 value menu."
Palmer isn't so sure the price cut is working, and lowered his first-quarter US sales estimate to up 1% from up 3.5%. He says the new dollar menu campaign "stole attention from local marketing, particularly at breakfast, which likely slowed as a consequence." Even worse, he wrote, McDonald's new value-conscious effort "may have invited a flurry of competitor responses and diminished its overall impact."
Still, investors don't need to flee the stock because its long-term prospects remain strong. He thinks McDonald's has numerous opportunities to boost same-store sales growth by creating "more effective value marketing, digital/delivery initiatives, product renovation," he wrote.
McDonald's may benefit from the tax plan, Palmer wrote, saying that improving wage growth may get more customers into restaurants. International markets are also a particular "bright spot" because of the weak US dollar.
McDonald's is down almost 14% this year.
- Mehmet Oz says he was 'exhausted' when he filmed viral 'Wegner's' gaffe, adding it's not a big deal because 'I've gotten my kids' names wrong as well'
- Life and times of Rakesh Jhunjhunwala — the man behind the trader
- A 29-year-old woman found a mark on her head and was diagnosed with a fungal infection. It turned out to be invasive skin cancer.
- Centre to form panel to seek views on adopting universal charger model
- Netflix will not allow you to watch movies and shows offline in the ad-supported tier
- Toy trains for kids
- Gig jobs are popular with pocket-money seeking teens, for primary earners it’s a burden
- Fintech services platform Razorpay acquires offline payments firm Ezetap