McDonald’s stock price targets change amid president’s warning

No more paying nearly $5 just for a taste of a McFlurry.

After introducing its $5 meal earlier this year, McDonald’s (MCD) has launched a mini version of its popular McFlurry dessert, offering customers a lower cost to enjoy the same classic flavors as Oreos and M&Ms, starting September 10.

McDonald’s is relying on cheap food to win back customers who are increasingly on tight budgets.

In June, the fast-food chain unveiled its summer meal, which includes four items: a choice of a McDouble or McChicken, four pieces of chicken nuggets, fries and a small soft drink. The meal is still available at the chain’s outlets.

“We’ve heard our fans loud and clear – they’re looking for even more value from us, and this summer that’s exactly what they’re going to get,” McDonald’s U.S. President Joe Erlinger said in a statement. always part of our DNA.”

McDonald’s said its $5 meal deal has exceeded expectations and is bringing lower-income consumers back to stores.

Image source: Ezra Acayan/Getty Images

What could be next for McDonald’s stock?

About a month ago, McDonald’s reported second-quarter earnings that missed estimates. Its share price rose following the results.

For the quarter, the fast-food giant reported diluted earnings per share of $2.80, an 11% decline that was below analysts’ consensus estimate of $3.07 per share. Revenue was $6.49 billion, below the forecast of $6.62 billion.

Related: McDonald’s Menu Adding a Bigger and Better Take on the Big Mac

McDonald’s also reported its first quarterly decline in same-store sales since the fourth quarter of 2020, saying it expected comparable sales to continue to decline in coming quarters.

But the value table works.

McDonald’s said its $5 meal business has exceeded expectations and is bringing lower-income consumers back into stores. The success helped the stock gain ground on earnings day.

Sign up for TheStreet’s free daily newsletter.

“We’ve seen a lot of enthusiasm, and the number of $5 meal deals sold is above expectations,” Erlinger said during the earnings call. “Offer trial rates are highest among consumers with lower income and brand sentiment around them. value and affordability have begun to change positively.”

However, the McDonald’s president also had some dark thoughts about how business could evolve here.

“We expect customers to continue to feel the tightening economy and higher cost of living for at least the next few quarters in this highly competitive landscape,” Erlinger warned.

Analysts adjust price target on McDonald’s shares

Jefferies raised its price target on McDonald’s stock to $330 from $310 with a buy rating.

The analyst told investors that McDonald’s foot traffic data for August showed average growth of more than 3 percent, compared to flat growth in Q2, according to thefly.com. Jefferies pointed out that McDonald’s increased focus on value marketing is driving traffic more effectively and earlier than anticipated.

Related: McDonald’s faces brutal price hike consequences

Loop Capital maintained a buy rating and $342 price target on McDonald’s, but noted that third-quarter same-store sales growth is currently beating expectations.

“The launch of the $5 mass offer on June 25 generated an estimated (3 to 3.5 percentage points) increase in same-store sales in the initial period from late June to early July and still solid growth (2 up to 2.5 percent). -dot) boost since mid-July,” the analyst said in a research note.

More Wall Street analysts:

• Analyst says Intel would have to divest a key business to survive
• Analysts are adjusting their price target on Bookings.com shares in the travel market
• Analysts are placing bets on shares of the Las Vegas strip casino

Tigress Financial also noted McDonald’s “value proposition,” raising its price target for McDonald’s to $360 from $355 with a buy rating.

The analyst said McDonald’s “operational excellence and capitalization of key digital initiatives and its loyalty program” helped the company “drive a strong performance in a challenging consumer environment.”

McDonald’s shares closed unchanged at $291.27 on September 10.

Related: Veteran fund manager sees world of pain coming for stocks