5 Takeaways From Lunch With McDonald's

• McDonald's Corporation MCD shares are down 6 percent over the past month, declining steadily since mid-August.
• Deutsche Bank’s Karen Short maintained a Buy rating for the company, with a price target of $120.
• Although McDonald's share performance has been weak, investors seem to be bullish about the company’s prospects, and believe that its shares hold limited downside risk.

Deutsche Bank hosted an investor meeting to discuss the view on McDonald's. While McDonald's recent stock performance has been weak, analyst Karen Short said that the group of investors attending their meeting indicated “a more positive view for MCD’s prospects with the general consensus that its shares hold limited valuation downside.”

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Short enumerated five main takeaways from the meeting:

1. A greater interest in “being long MCD shares”
2. The company would need to achieve “modestly positive” same-store sales in Q3, before “accelerating into 4Q to drive the shares”
3. People seem to be “pricing in more capital returns” at the analyst meeting
4. The company would benefit from greater re-franchising and cost cutting
5. The bear thesis “was not particularly well articulated (or generally just not articulated at all) in our view.” The bearish stance seems to be based on the company’s “inability to regain its lost U.S. SSS momentum”

“We believe the company is in the midst of a turnaround based on its structural re-organization, operational and financial changes,” Short wrote.

McDonald's has generated lackluster results over the past several years. The Deutsche Bank report said, however, that the company presents a “very favorable” risk-reward investment for shareholders, given the “management’s renewed sense of urgency and willingness to challenge the previous administrations’ strategies and philosophies.”