Consumer behavior and preferences have not gone in favor of McDonald’s. The rise of the organic and natural foods trends has trumped the notion that a family can go eat a truly large meal at McDonald’s for very little money. Many consumers just no longer want a 740-calorie burger and a 520-calorie shake. Maybe the recovery has just allowed all the McDonald’s fans to go eat elsewhere too. Whatever you want to blame the change on, the end of the argument stops with truly poor same-store sales trends.
It is usually not prudent to invest in the stocks of companies that have struggled with their businesses recently. An exception is the golden arches, which is retooling its menu to be more attractive to consumers. Given its number of locations and the share of total fast-food outlets the company represents, its tremendous marketing budget and its ability to test menus and change them quickly, McDonald’s opportunity to turnaround is at least even.
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What may be amazing is that McDonald’s shares have not fallen further. Despite being a dead stock and despite being under such a negative cloud of recent, McDonald’s shares trade at about 18 times trailing earnings and about 17 times forward earnings expectations. Perhaps the lack of a discount to the broader stock market is because McDonald’s is a truly defensive stock. If times get tough again, you can feed an army for less than $20 there. 24/7 Wall St. has included more in our bullish and bearish evaluation of McDonald’s in 2015.
The 200-day moving average was tested over the past quarter but acted as resistance, continually pushing shares below. It currently reads at $95.05, with the 50-day moving average at $93.55.
In Thursday’s midday trading, shares of McDonald’s were up marginally to $90.66. The stock has a consensus analyst price target of $96.44 and a 52-week trading range of $87.62 to $103.78. The market cap is about $88 billion.
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