Why McDonald's Corporation Might Pull Back in 2014

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of McDonald's Corporation (NYSE: MCD  ) slipped 1% on Wednesday after Wells Fargo downgraded the fast-food giant from outperform to market perform.

So what: Along with the downgrade, analyst Jeff Farmer maintained his valuation range of $100 to $102, representing about 5% worth of downside to yesterday's close. While value investors might be attracted to the stock's sluggish action during the past several months, Farmer believes that top-line headwinds should continue to limit multiple expansion going forward.

Now what: Wells expects McDonald's ROIC to continue to slip in 2014. "McDonald's U.S. market share losses in three of the last four months through November have increasingly captured our attention," noted Wells. "MCD was more aggressive in 2013 with both new products and promoting value, but the company's recent U.S. market share losses suggest that the long-delayed raising of the competitive bar by [Wendy's] and [Burger King Worldwide] is creating a tangible top-line headwind for McDonald's, and one we expect to persist in 2014." With McDonald's shares currently boasting a 3%-plus dividend yield, however, those short-term concerns might be providing patient Fools with a solid long-term income opportunity.

Another compelling pick for 2014
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2787372, ~/Articles/ArticleHandler.aspx, 9/19/2014 2:13:08 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement