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Expect McDonald's Focus On Value To Deliver Upside In The Year To Come

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Expect McDonald's Focus On Value To Deliver Upside In The Year To Come

Shares of McDonald's Corporation (NYSE: MCD) are up more than 25 percent since the start of 2017 and even hit a new all-time high of $155.28 on Tuesday. As such, many investors are wondering if now is a time to cash in on profits or if the popular fast food restaurant chain's stock has further upside.

Cowen Upgrades To Outperform

McDonald's is on track to deliver upside to U.S. comps through 2018 by offering consumers compelling value promotions and driving sales through digital efforts, Cowen's Andrew Charles commented in a report. In fact, the analyst's bullish view of McDonald's outlook resulted in an upgrade in the stock's rating from Market Perform to Outperform with a price target boosted from $142 to $180 (see Charles' track record).

McDonald's has done a "great job" of introducing new and simple menu options and more value items over the past two years, Charles continued. But based on the analyst's propriety survey data, it wasn't until September of last year when McDonald's value perception versus other chains began to improve. Moreover, it wasn't until January of 2017 when McDonald's value perception positively inflected among lower income respondents.

McDonald's image has continued to improve since January as value perceptions hit peak levels as of last month, the analyst added. Looking forward, momentum is likely to continue as management is set to roll out in late 2017 or early 2018 a national value platform that focuses on the $1 to $3 price points.

Bottom line, the analyst believes the improved value proposition will contribute to U.S. sales outperforming its peers. Comps could also grow as much 3.4 percent in 2017 and 3 percent next year which marks an increase from the analyst's prior estimates of 2.2 percent and 2 percent, respectively.

Related Links:

Better Innovation, Value And Technology At McDonald's; Bernstein Upgrades To Outperform

5 Biggest Price Target Changes For Tuesday

Latest Ratings for MCD

DateFirmActionFromTo
Jul 2020B of A SecuritiesMaintainsBuy
Jul 2020Credit SuisseMaintainsOutperform
Jul 2020Morgan StanleyMaintainsEqual-Weight

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