McDonald’s stock fell sharply during Tuesday’s trading session, dropping as much as 2.5% intraday before closing down over 1%. The decline extends the company’s June losses to approximately 3.3%.
Unexpected Downgrade Rattles Investors
Investment research firm Redburn Atlantic, a Rothschild company, surprised markets by downgrading McDonald’s from “buy” to “sell” – its first negative rating since initiating coverage in 2023.
Analysts Chris Luyckx and Edward Lewis projected that growing adoption of GLP-1 weight-loss drugs could reduce McDonald’s annual revenue by up to $428 million, representing about 1% of systemwide sales.
“While just a 1% drag today, this could easily expand to 10%+ over time, particularly for brands skewed toward lower-income consumers or group occasions,” the analysts warned in their note.
Wall Street’s Most Bearish Target
Redburn set a $260 price target for McDonald’s – the lowest on Wall Street and nearly 15% below Monday’s closing price. The downgrade follows similar cautious moves by Morgan Stanley, Loop Capital, and Erste Group in recent weeks.
Analyst sentiment remains divided, with 22 “buy” ratings, 18 “hold” ratings, and an average price target of $332 according to market data.
Fundamental Challenges Mount
The warning comes after McDonald’s reported a 3.6% decline in U.S. comparable-store sales for Q1 2024 – its worst performance since the COVID-19 pandemic began. Industry data shows fast-food traffic has declined in 40 of the past 43 months.
Redburn’s report suggests McDonald’s recent price increases have damaged its value proposition: “While the brand historically benefited from trade-down during economic stress, recent menu price inflation has been too aggressive, compromising its value perception and weighing on traffic.”
Broader Restaurant Sector Implications
Redburn also initiated coverage on other restaurant stocks, assigning Domino’s Pizza a “sell” rating and Chipotle Mexican Grill a “neutral” rating. Conversely, YUM! Brands (parent of KFC, Taco Bell, and Pizza Hut) received an upgrade to “buy” based on valuation.
The analysts noted McDonald’s faces particular pressure as the price gap between grocery stores and restaurants widens, pushing more budget-conscious consumers toward home dining.
Despite year-to-date stock gains, Redburn cautioned that McDonald’s growth may prove unsustainable without meaningful improvements in value perception and menu innovation.
Related topics：
- Yado Hotel Apologizes Again for the “Pillowcase Incident”: The Affected Store Has Been Closed for Rectification, And All 4,440 Sets of Linen Will Be Completely Replaced.
- Efinda, On the Verge of an Ipo: Profit Roller Coaster, Nearly 100 Million Yuan of Short-Term Debt Weighing Down, And the Family Mystery of the “Airline Stewardess Director”
- Beijing Wujia Dajia Information Technology Group Has Been Classified as Having Abnormal Business Operations.
