What happened
Shares of fast-food restaurant McDonald's (MCD 1.25%) fell as much as 5.7% on Friday after an analyst slashed his price target for the stock, which finished the trading day down 4.77%.
RBC Capital Market analyst David Palmer cut his price target for the stock by 9%, lowering it from $190 to $170. Palmer said (via CNBC) he "significantly" lowered his U.S. forecast for McDonald's comparable-restaurant sales growth "due to deteriorating industry conditions and a disappointing early sales impact from the $1, $2, $3 value menu."
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So what
Palmer's lowered price target for McDonald's follows a strong fourth quarter with robust comparable-restaurant and systemwide sales growth. During the quarter, comparable-restaurant sales increased 5.5% year over year. In the same period, systemwide sales grew 8%.
To help keep up the company's strong growth, management said that one of its tactics during the year would be to emphasize value. Specifically, management said it would put a greater focus on $1, $2, and $3 price points. But Palmer is apparently disappointed in McDonald's value strategy so far.
Now what
Nevertheless, investors should note that even though Palmer lowered his price target for McDonald's, he's still bullish on the stock. A $170 price target is nearly 15% higher than the $148.27 price at which the stock finished on Friday. Further, along with his lower price target for McDonald's, Palmer still reiterated an outperform rating for the stock on Friday.
