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History shows McDonald’s $5 meal may drive up sales and stock price

admin by admin
July 1, 2024
in Business
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History shows McDonald’s $5 meal may drive up sales and stock price
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McDonald’s $5 value meal offering could provide a turnaround for the struggling stock, according to Wells Fargo. The deal — which includes a McChicken or McDouble sandwich, four-piece chicken nuggets, small fries and a small drink — debuted on June 25 and will run for a month but may be extended, CNBC previously reported. The $5 meal is approximately a 40% discount compared to core menu prices, Wells Fargo said. The value offering comes as McDonald’s shares have fallen about 15% year to date as higher prices and lower sales in the Middle East resulted in weaker same-store sales in the first quarter. “Using history as a guide,” Wells Fargo believes the $5 meal could boost stock performance. The bank looked at four of McDonald’s previous value meal launches in the U.S. — the Original Dollar menu in November 2002, Breakfast Dollar menu in January 2010, $2-$3 value menu in January 2019 and the 2 for $5 mix & match deal in December 2018. According to analyst Zachary Fadem, McDonald’s managed to outperform the S & P 500 by around 75% in the four years after launching its Dollar Menu, which came during a difficult consumer recession. The Breakfast Dollar menu also turned the stock modestly higher, according to Fadem. “Historically, MCD wins when the industry shifts to value,” Fadem wrote in a note released Monday. McDonald’s competitors took a hit after the company launched the dollar menu — and took back some share after McDonald’s removed the Dollar menu, he added. “Competitor comps historically slow during prior periods of MCD national value step up.” Fadem forecasts the $5 value meal could provide a tailwind of 50 to 100 basis points for McDonalds U.S. comparable same-store sales. “We see reason for sentiment to turn,” Fadem said. Along with the value meal, the analyst believes fading Mideast conflict headwinds and the upcoming Olympics should drive the stock in the second half of the year. Wells Fargo has an overweight rating and $300 price target on shares, implying about 18% upside from Friday’s close. —CNBC’s Michael Bloom contributed to this report.

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