McDonald's: Guggenheim cuts price target on fast food stock

Guggenheim cut its price target on fast food giant McDonald's (MCD) from $315 to $280 per share. The Morning Brief team reviews the analyst note, which cites McDonald's softening sales as a cause for concern.

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This post was written by Luke Carberry Mogan.

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Video transcript

Shares of mcdonald's moving after go I securities lowered its price target on the fast food giant analyst by the call slashing its target from $315 down to 280 citing softer sales and made a more challenging consumer economic backdrop.

You can see the stock is basically flat here, just tipping to the downside.

It's interesting though on the mcdonald's front, it's down actually 16% so far this year, they did reiterate there by rating on the stock.

So not seeing a long term negative story for the company, but they are seeing short term concerns and they say that they are really concerned about the near t near term sales.

And a question of is this the beginning of a trend where they see some of the consumer facing names, kind of moving to the downside ahead of two Q earnings?

That's at least my question.

Is this going to be a more broad story or is this idiosyncratic to mcdonald's, which we know is one of the companies that the low and consumers have been impacting, given that they are doing more just at home eating, uh instead of doing that, you know, purchase at a mcdonald's, that would be a little bit more of a splurge for those consumers who are starting to buckle under the weight of inflation.

Yeah, absolutely.

I mean, look within this as well, we saw the restaurant chains best idea designation removed.

So no longer the best idea from the analyst Greg Frankfurt over there also cutting the same store sales estimate to about 2/10 of a percent, up 2/10 of a percent.

Um You compare that to the consensus from Bloomberg, at least that sits at about 1.1% right now.

And the environment that we're thinking about as, as we're taking a look across those quick service and, and fast food names on the screen right now.

Also remember that the consumer that is continuing to kind of go into or look at a luxury spend, which is say a Chipotle at this juncture right now, a Chipotle, for instance, I mean, that is into a lot of the athletes that are saying they've got, you know, their go to orders mcdonald's had done really well with cultural relevance for so long.

I mean, to the point where, you know, grimace was, was cheered on at a Mets game recently, I think it was so, you know, all these things considered it, it's really how do you maintain that cultural relevance?

And I think for Chipotle leaning into the Olympic athlete leaning into where they can perhaps find some favorability in sport right now.

It's a larger question of what that next cultural relevant moment is for mcdonald's, how they can capitalize on that.

The brand that had essentially had a custom order for everybody from Travis Scott to, I think Billie Eilish had her own order at some point too.

Uh and even K pop stars BT S. So all of these things considered, what is that next big moment that they're going to be able to latch on to and, and kind of drive the demand or generate demand around too.

And I think that's their point, that long term they will be able to do that, but near term, still a question mark.