McDonald’s (MCD) stock forecast: are investors still lovin’ it?
Global fast-food giant McDonald’s (MCD) stock soared 24.93% at the end of 2021. There was recovery in overseas markets after more countries relaxed their Covid-19 restrictions. Gains were further aided by the expansion of drive-thru services, the MyMcDonald’s app and reward programme, and new menus that included plant-based burgers and sandwiches. In 2021, the company generated more than $10bn in operating income.
The Golden Arches share price began 2021 at $ 212.11. It rose over the year, reaching a new record on April 30 when it hit $236.10 after reporting that sales and revenue had returned to pre-pandemic levels in the first quarter. The company reported first-quarter revenue at $5.12bn, surpassing the 2019 first-quarter level of $4.95bn.
On July 27 2021, McDonald’s stock traded at $246.35 after reporting another solid financial performance in the second quarter. Strong chicken sandwich sales and its ‘famous orders’ promotion with superstar K-Pop group BTS boosted income in the US by 25.9% over the quarter. Fewer restaurant closures and an easing of Covid-19 restrictions pushed recovery in key international markets, such as the UK, Australia and Canada.
On 23 September, McDonald’s announced a cash dividend of $1.38 a share, payable on 15 December 2021 – a 7% increase on the previous quarterly dividend. It also marked 45 consecutive years of payments since the company paid its first dividend in 1976. The company closed the year at $268.07 a share.
While economies should continue to recover in 2022, the year will present new challenges, including inflationary pressure from rising commodities prices. This article will discuss McDonald’s stock news and analysts’ predictions.
Banking on digital platforms and new menus
The Covid-19 pandemic pushed many companies to adopt digital technology to reduce contact while serving customers. In July 2021, McDonald’s launched MyMcDonald’s Rewards, in which customers who order food via the MyMcDonalds app can earn points. The programme, initially launched in the US, is now available in more than 40 markets.
The company reported that in 2021, the MyMcDonald’s Rewards programme drove digital sales of more than $18bn, or over 25% of its top six markets: the US, UK, Australia, Canada, France and Germany.
On a conference call with analysts on December 27, Chris Kempczinski, the McDonald's CEO, said:
He added that in the programme’s first six months in the US, over 30 million loyalty members enrolled and 21 million active members earned rewards.
According to Kempczinski, currently about 25% of McDonald’s business goes through digital channels.
On the product side, apart from its familiar menu items such as Big Mac, the company is focusing on various innovations, including a crispy chicken sandwich and the plant-based McPlant burger, made in collaboration with plant-based meat producer Beyond Meat. After a pilot test in 250 restaurants in the UK, the McPlant is available in all McDonald’s stores in the UK and Ireland, according to the company on January 27’s earnings call.
McDonald’s also teamed up with celebrities such as Travis Scott and BTS for time-limited meal package promotions that proved to be a big hit.
Tim Seymour, of Seymour Asset Management, commented on the team-ups on CNBC this January 3:
Facing inflationary pressure
McDonald’s started the year on a solid note at $268.58 and hit the highest at $269.69 on 6 January. But the stock has dropped 3.57% so far this year. Falling to $248.78 on 27 January after it reported fourth-quarter earnings that missed analysts’ estimates.
The company had a net income of $1.64bn in the fourth quarter of 2021, up from $1.38bn in the same period in 2020. Revenue of $2.23 a share was below the analysts’ consensus of $2.34, according to Market Beat.
Operating costs, including wages and food prices, rose by 10%, weighing on the company’s net income for the quarter.
Kevin Ozan, McDonald's chief financial officer, said during the earnings call on January 27 that in 2021 that food and paper costs in the US were up 4% for the year. He expects commodity pressures to continue into 2022, adding:
On the international market, the company saw about a 3% increase in food and paper costs in 2021.
Despite the challenges, McDonald’s expects to open over 1,800 restaurants. More than 500 new openings will be in the US.
McDonald’s stocks buy, sell, or hold?
At the time of writing, analysts maintained a bullish outlook for the Golden Arches for the next 12 months. A consensus of 28 analysts polled by Market Beat shared a positive outlook, with 24 analysts recommending ‘buy’ and four ‘hold’. The analysts gave a 12-month average stock price target of $279.37 a share, indicating an 8.12% upside, as of 1 February.
Of 37 investment analysts surveyed by CNN Money, 24 recommended buying McDonald’s stock, three rated it ‘outperform’ and 10 rated it a ‘hold’, as of 1 February. The 12-month average target price was $282.50.
Of 23 analysts polled by stock forecast data service TipRanks, 21 rated McDonald’s a ‘buy’. The 12-month average price target was $288.95, representing a 12.10% upside.
McDonald’s stock forecast
Financial market technical analysis and forecasts provider Wallet Investor expected the company to continue its uptrend in it’s McDonald’s share price prediction, predicting that it could close at $298.75 in December 2023 and $344.116 in December 2025.
Gov Capital forecasted the company’s stock price could rise to $433.20 within a year on February 1 2023 and surge to $1317.56 by December 2026.
AI Pickup estimated McDonald’s stock price could hit an all-time high of $547.96 between 2022 to 2028. After that, the forecaster expects McDonald’s stock prices to stay above $300 within the next decade, reaching $323.75 in 2030.
Note that analyst forecasts can be wrong. So forecasts shouldn't be used as a substitute for your own research. Always conduct your due diligence before investing. Past performance is no guarantee of future success. And never invest or trade money you cannot afford to lose.
FAQs
Is McDonald’s stock a buy?
Most analysts currently hold a bullish outlook for McDonald’s. However, whether it’s a good buy or not will depend on your investing goals and portfolio composition. You should do your research and never invest what you cannot afford to lose.
Why has the McDonald’s stock price been going down?
Although reporting operating income of more than $10bn, the company’s earnings per share missed analysts’ estimates.
Will McDonald’s stock go up or down?
The majority of analysts’ forecast that McDonald's stock could go up within 12-months. You should always do your research first before investing.
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