According to a Jefferies analyst, fast food king McDonald’s is a buy.
The company’s digital app for deals and promotions is gaining traction with consumers, according to the firm.
Jefferies analyst Andy Barish believes that same-store sales for McDonald’s should benefit from the app as well as from the company’s efforts to revamp its restaurants.
McDonald’s announced last month a $6 billion planned U.S. restaurant modernization that will include updating dining rooms and digital self-order kiosks, among other changes.
Among the investments are $320 million in New York to modernize more than 360 restaurants, $390 million to upgrade 550 locations in California, $163 million in Virginia for more than 250 restaurants, $214 million in North Carolina for more than 430 restaurants, $448 million investment for 840 restaurants in Texas, $317 million for 410 spots in Illinois, $19 million in Washington, D.C., for more than 15 units, $104 million for 135 restaurants in Maryland, $251 million in Ohio for 380 restaurants, $168 million in Indiana for 270 restaurants, $186 million for 240 restaurants in Florida, $170 million for 340 restaurants in Georgia, and $266 million in Pennsylvania for 360 restaurants.
Barish noted, “We also see deeper penetration as customers take advantage of value offers,” analyst Andy Barish said in a note to clients Tuesday, estimating gains in same-store sales of 3 percent.”
“Mentions of Big Macs (in association with the 50th Anniversary promotion) and fresh beef (quarter-pounders and Signature Crafted) are up noticeably,” Barish said.
Jefferies has a “buy” rating on the stock with a $190 price target on the stock.
Bank of America analyst Gregory Francfort recently said that he expects McDonald’s total U.S. restaurant count to dip to 13,905.
According to the analyst, several trends are impacting restaurant counts including closing locations inside Walmart superstores and struggling shopping malls.
“We believe MCD’s current 0.8 percent closure rate will taper and flip to expansion in 2020 as a heavy shrink in Walmart and mall units ends and we get beyond an expensive reimage program,” said Francfort.
The fast food King’s total number of U.S. mall locations has decreased over 50 percent from 160 in 2012 to 74 in 2017 and Francfort projects that decline will continue to 37 mall locations by 2022.
He said, “The Walmart stores have short leases and we think are closing due to WMT not choosing to heavily reinvest in the brand refresh MCD is pushing.”
“”McDonald’s shares have appeal as a total return vehicle, including a long-established history of annual dividend increases.”