Buy McDonald’s Stock, Analyst Says. Its Traffic Is Sizzling
Barrons
Sep 25, 2020
McDonald’s saw plenty of initial success from its collaboration with rapper Travis Scott, but Gordon Haskett argues that the partnership appears to be driving a lasting lift for the fast food giant.
Analyst Jeff Farmer reiterated a Buy rating and $234 price target on McDonald’s (ticker: MCD) Friday. The company’s same-store sales increase midmonth, which coincided with the launch of the Travis Scott meal deal, hasn’t gone unnoticed by the Street, but he argues that it’s more than a one-time blip.
Farmer’s data shows that daily domestic foot traffic for McDonald’s is up week over week for 12 of the 14 days since the meal’s September 8 debut (which also coincided with the launch of spicy McNuggets, also available for a limited time only). For September 21 (the most recent date of available geolocation data), McDonald’s seven-day average traffic is up 13%, compared with the period before the Travis Scott meal. This bump also includes weekends, which had lagged behind weekdays in terms of recovering from Covid-19-related weakness.
Daily average downloads of the McDonald’s mobile app is another positive point, rising 25%. Farmer notes that in the weeklong period ending September 21, app downloads jumped to the highest level in two years—when the company offered free french fries with all mobile orders over $1.
“U.S. same-store sales momentum and the multiple expansion that has historically followed trumps rising Covid case counts in key international operated markets (France, UK, Spain) for now—but we will continue to closely monitor these countries for potential restaurant closure mandates,” he concludes.
McDonald’s is edging down 0.4% to $215.25, although it has gained more than 9% year to date, easily ahead of the S&P 500. The company has seen its fair share of headwinds in 2020, but that hasn’t stopped the stock from bumping up against fresh highs as sales rebounded from lows this spring.