It's easy to be bearish on McDonald's (MCD -0.24%) stock these days. At the end of April the fast-food giant unveiled its first quarter results, which featured a rare company miss on the average analyst net income estimate.
This and other factors caused several analysts to cut their McDonald's price targets. One who did so reduced his to $310 per share; however, that still implies potential upside of 15%. Is it a wise move to continue believing in this company?
Unimpressive comps for the quarter
That prognosticator was KeyBanc's Eric Gonzalez, who issued a new research note just after the publication of that earnings release. That reduction wasn't huge, as Gonzalez only lopped $5 off his previous $315 per share price target; meanwhile, he kept his overweight (i.e., buy) recommendation intact on McDonald's stock.
In his new take, the analyst noted that the company's all-important comparable sales growth -- which came in at 1.9% -- was dampened by the situation in the Middle East, and by the trend of customers eating more at home.
Still, he added, "we continue to favor McDonald's global leadership position and sustainable competitive advantages."
NYSE: MCD
Key Data Points
Dynamics are more important than numbers
Metrics like "comps" are important for sure, but investors need to look at all dynamics of a company's business in their decision to buy (or sell, or hold) its stock.
McDonald's still has a great many advantages, particularly when it comes to elements that really count these days, like innovation -- those in-store ordering kiosks are very effective, for example, and its drive-through experience is much smoother and quicker than that of most rivals.
Management has also proven to be quite sharp about hewing to consumer tastes, as we've seen vividly in the company's success with the McCafe product line, among other offerings.
So I wouldn't get hung up too much on comps. I think McDonald's is an ace company well worth the slightly deflated price at which it currently trades. That $310 price target might even be too modest for this powerhouse.
