Hinting at the return of last year's chicken sandwich wars, McDonald's (MCD -0.05%) received a "positive catalyst watch" from Citigroup (NYSE: C) this morning, based on the chain's upcoming launch of a new chicken sandwich later this month.
McDonald's plans three different variants on the chicken sandwich this year (spicy, classic, and deluxe), Reuters reports, tapping into the public's soaring appetite for crispy chicken breasts. All three variants will be available on Feb. 24.
Image source: Getty Images.
While chicken sandwiches are extremely popular, some experts say that McDonald's lacks the experience and equipment for producing them to today's standards. Chas Hermann, a restaurant consultant, told Reuters he would "bet big time that McDonald's never competes in the chicken business." Conversely, Credit Suisse (NYSE: CS) said the chain might sell 150 sandwiches per location daily, almost four times the typical sales of a new sandwich item at Restaurant Brands International's (NYSE: QSR) Burger King restaurants.
According to The Fly, Sergio Matsumoto, analyst at Citi, predicts the sandwiches will boost McDonald's comparable-store sales anywhere from 6% to 12% for the first six months of 2021. His price target of $230 represents an approximate 10% upside from the stock's price at market open today, and his buy rating remains unchanged.
The Citi research note says that launching the chicken sandwich in the midst of a coronavirus lockdown "brings an advantage for MCD that is underappreciated, in our view." Matsumoto notes McDonald's has high market penetration, with 41 restaurants per million population, and consumers who are a "captive audience" due to lockdowns will likely find a convenient drive-thru nearby.
McDonald's sales and earnings were depressed by the pandemic during 2020, but are showing signs of a return to growth.
