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McDonald’s stock is outperforming trends, analysts see more gains ahead

McDonald’s stock is outperforming trends, analysts see more gains ahead

McDonald’s (NYSE: MCD) stock price has been rallying at a robust pace as shares of the largest fast-food chain rose close to 28% in the last six months despite the fact that the restaurant industry is hit hardest by the pandemic.

The shares of McDonald’s are up 15% so far this year. In addition to share price gains, the company has kept its dividend growth policy at a time when several other key players have slashed dividends to save cash for their own survival. McDonald’s has recently raised the quarterly dividend by 3%, marking the 40th consecutive year of a dividend increase.

MCD McDonald's Corporation daily Stock Chart
McDonald’s stock performance. Finviz chart

Drive-thru and digital presence supported McDonald’s stock gains

The company has generated comparable sales growth of 2.2% in the US while global comparable sales fell 4%. Its quick service segment along with robust growth in digital sales helped in standing taller in a challenging environment.

Restaurants were among the hardest hit businesses due to the pandemic. The National Restaurant Association reported that 100,000 restaurants have closed permanently after the pandemic, adding that the entire restaurant industry would face a loss of $240 billion in sales this year.

The consensus estimate for McDonald’s third-quarter revenue stands around $5.35 billion, up significantly from second-quarter revenue of $3.76 billion.

“Our unique strengths, including our unrivaled drive-thru presence around the world, advanced delivery, and digital capabilities, and marketing scale have become even more important during the pandemic,” said McDonald’s President and Chief Executive Officer Chris Kempczinski.   

Analysts see further upside for McDonald’s stock

Although McDonald’s stock price is currently trading around an all-time high of $230, Bank of America has raised the price target to $250. The firm is optimistic about future fundamentals as well as strong liquidity to support investments in growth opportunities.

Meanwhile, Wells Fargo says McDonald’s strategy of introducing the Travis Scott meal and Spicy Nuggets menu would improve traffic in the coming days.

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