McDonald's Stock Faces Death Cross, And Investors Aren't Loving It

Zinger Key Points
  • McDonald's stock has formed a Death Cross pattern, indicating a potential downtrend, as the stock faces challenges with a 9.66% dip YTD.
  • Despite reporting positive first-quarter FY24 results, the stock has declined by 2% already, since the earnings report.

McDonald’s Corp MCD has recently formed a Death Cross pattern, a bearish technical signal indicating a potential downtrend.

This development comes as McDonald’s stock has faced challenges, with a 9.8% decline over the past year and a 9.66% decrease year-to-date.

Chart: Benzinga Pro

McDonald’s Stock Down 2% Since Q1 Earnings

In its recent Q1 earnings report, McDonald’s reported a 4.6% year-over-year (YoY) increase in sales to $6.17 billion, beating analyst estimates. Global comparable sales rose 1.9%, marking 13 consecutive quarters of positive comparable sales growth. U.S. comparable sales increased by 2.5%, with systemwide sales rising by 3%.

Despite these positive figures, adjusted EPS of $2.70 missed the consensus estimate of $2.72. The stock is down 2% since McDonald’s earnings report released on Apr. 30.

Death Cross Formed On McDonald’s Price Chart

The pessimism has now led the stock to a Death Cross formation on its price chart. This occurs when the stock’s short-term moving average, typically the 50-day moving average (orange line above), crosses below its long-term moving average, often the 200-day moving average (blue line above).

The Death Cross is a bearish technical signal indicating a potential downtrend. For McDonald’s, it has come amidst broader market turbulence and concerns about inflation, impacting consumer spending and fast-food chains like McDonald’s. Despite the company’s efforts to adapt to changing consumer preferences and enhance its digital offerings, investors remain cautious.

McDonald’s stock had made a Golden Cross back in Jan. We covered it here: From Golden Arches To Golden Cross, McDonald’s Stock: Investors Say “I’m Loving It!” However, contrary to expectations, the stock is down 8.85% since then.

Intensifying Competition And Margin Squeeze

The lack of top-line growth and recent challenges have raised concerns about the company’s future, creating a mixed outlook among investors.

McDonald’s faces challenges in its core markets, with competition intensifying and rising costs squeezing margins. The company’s recent earnings report reflected some of these challenges, with earnings missing expectations and revenue growth slowing.

The company’s CEO Chris Kempczinski remains optimistic, “As consumers are more discriminating with every dollar that they spend, we will continue to earn their visits by delivering leading, reliable, everyday value and outstanding execution in our restaurants.”

McDonald’s has also recently been in the news for its expanded partnership with Krispy Kreme Inc DNUT.

Related: Krispy Kreme-McDonald’s Deal Spikes Insulin Stock Interest: ‘We’re About To Cash In On The Aftermath’

Analysts Lowering Their Price Targets

Looking ahead, McDonald’s expects its FY24 operating margin to be in the mid-to-high 40% range, with capital expenditure of $2.5 billion to $2.7 billion. The company also plans to open about 2,100 restaurants globally in FY24.

Following the earnings announcement, several analysts made changes to their price targets on McDonald’s stock. Baird lowered the price target from $305 to $300, Wedbush reduced it from $300 to $295, and BMO Capital cut it from $335 to $330. Despite these adjustments, all three analysts maintained an Outperform rating on McDonald’s stock.

Investors should closely monitor the stock’s performance, especially given the Death Cross pattern and the broader market conditions.

Read Next: McDonald’s Tries Out Bigger Burger To Boost Sluggish Sales

Image: Shutterstock

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