McDonald’s Probes New High After Twin Upgrades

Dow component McDonald’s Corp. (MCD) is testing September’s all-time high above 225 on Monday after two Wall Street upgrades stoked investor buying interest. Restaurant analysts at Wells Fargo and Bank of America have issued highly bullish commentary in the last few days, pointing out impressive drive-through and off-premises sales as well as improving prospects for a “multiyear run of compounding same store sales and growing profits.”

Restaurant Industry Headwinds

Even so, the fast food king needs to overcome industry headwinds that have kept the majority of restaurant stocks from hitting new highs in 2020. For starters, international sales have lagged as a result of fewer drive-through facilities and a crazy quilt of shutdown rules that have impeded indoor service. In addition, the Northern Hemisphere is now headed into the cold autumn and winter months, raising odds for a second infectious wave and draconian shutdowns.

Bank of America Securities analyst Gregory Francfort raised their McDonald’s target from $220 to $250 on Monday, noting “the quick service segment as a whole has seen greater demand during COVID than pre-COVID as consumers tired of their own cooking and leaned into drive-thru and off-premise for engagement with restaurants. This can be seen in our aggregated BAC credit and debit card data by industry segment which showed limited service sales in August growing at a faster clip than before COVID”.

Wall Street And Technical Outlook

Wall Street consensus has been highly bullish since the second quarter and has now lifted into a ‘Strong Buy’ rating, based upon 16 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions at this time. Price targets currently range from a low of $195 to a street-high $250 while the stock opened Monday’s U.S. session right at the median $225 target. This mid-range placement can support even higher prices unless analyst bias reverses gears over the winter months.

McDonald’s mounted the August 2019 high at 222 in September and pulled back, crisscrossing the contested level several times. This is typical price action, denoting a testing phase that eventually yields a sustained breakout or a reversal that reinforces resistance. Accumulation readings confirm steady buying interest despite deaccelerating price rate of change, raising odds that bulls will ultimately prevail and the stock rallies toward 250.

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