McDonald’s Stock: Great Entry Point as Shares Stall

Stock Market

McDonald’s (MCD) stock has really run out of steam in recent months, amid renewed concerns over the Delta variant of COVID-19. Undoubtedly, many restaurants have seen their reopening plans derailed.

As the spread worsens over the coming weeks, a number of McDonald’s franchisees can be expected to roll back their recent reopening of dining rooms. (See MCD stock charts on TipRanks)

Despite this, I am bullish on the stock. Here’s why.

Delta Takes Bite out of Fast-Food Recovery

Indeed, after making several steps forward through the year, many fast-food chains are starting to lose their stride. Regardless, I think high-quality fast-food stocks like McDonald’s represent impeccable value here in a borderline expensive market.

Looking a month or two down the road, COVID-19 cases are likely to go on a steep downtrend again. From there, you can expect McDonald’s will be in a spot to pick up where it left off for the next leg of reopening.

When it comes to high-quality fast-food firms, it’s nearly impossible to top McDonald’s under the leadership of its CEO, Chris Kempczinski, who’s done a marvelous job of steering McDonald’s through one of the worst crises in its history.

McDonald’s is the king of the fast-food world, and Kempczinski has really delivered over a tough past year and a half. Despite dining room closures, the company has done an exceptional job of weathering the storm across its drive-thru, delivery and digital businesses. Few restaurant firms can execute so effectively across each of the so-called “three Ds” better than McDonald’s.

As dining rooms, the “fourth D,” stand to go offline in select markets, investors should expect more continued resilience, as the three Ds that do stay online step up to offset any renewed sales weakness.

Celebrity Collabs Power McDonald’s to Q2 Beat

In July 28, McDonald’s knocked one out of the ballpark, with a strong Q2 earnings report. Adjusted earnings came in at $2.37 per share, beating expectations calling for $2.11 per share.

The quarter was undoubtedly stacked up against favorable numbers, on a year-over-year basis. That said, investors shouldn’t ignore the blockbuster sensation that was the BTS Meal, which was released in collaboration with the South Korean boy band BTS.

The BTS Meal, which topped the fast-food chain’s previous Travis Scott collaboration, helped fuel McDonald’s above expectations. Moving ahead, such “famous order” celebrity meals are likely to continue moving the needle for the company, even as the tides turn against it. Next up to the plate? The Saweetie Meal.

Wall Street’s Take

According to TipRanks’ consensus analyst rating, MCD stock comes in as a Strong Buy. Out of 24 analyst ratings, there are 21 Buys and three Holds.

The average MCD price target is $267.91. Analyst price targets range from a low of $232 per share, to a high of $295 per share.

Supersized Returns Ahead?

Wall Street is standing by McDonald’s stock.

It’s a great defensive company, with a lot going for it over the coming months.

Investors are going to want to look past near-term reopening setbacks if they want a shot at supersized gains, as McDonald’s continues to perform despite less-than-ideal circumstances.

Disclosure: At the time of publication, Joey Frenette held a position in McDonald’s stock.

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