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McDonald’s stock (NYSE:MCD) looks attractive both in defensive and offensive environments and is a top pick for Jefferies in the fast-food restaurant sector.
When the economy and the consumer happen to stall, McDonald’s (MCD) tends to outperform a lot of the other restaurants companies (EAT), (SHAK), (WEN), (CMG) in terms of for sales, said Andy Barish, Jefferies’ equity analyst, who rates the stock as a “buy” play and gives a price target of $330.
But offensively, he said during a CNBC interview, the company announced at a December analyst day that they are looking at a better global opportunity for unit growth, which should propel the financials over the next several years, potentially growing their multiple, “more in line with some of the other quick service restaurant companies.”
The reason why it lagged the market this year was due to the summer sell-off because of the GLP-1 drugs headwinds.
Food retailers and producers got slammed as GLP-1 drugs, such as Ozempic and Wegovy — both made by Novo Nordisk (NVO) — drove consumer-staple stocks’ demand lower, affecting companies such as PepsiCo (PEP), Coca-Cola (KO), Walmart (WMT) and Costco (COST).
“That uncertainty over the August-September period certainly took a little bit of wind out of the sales,” said Barish. “I think the company is regaining momentum and confidence in the investment community” who will “probably use that as a buying opportunity should the stock weaken.”
In addition, he said that the whole restaurant industry continues to grow even with some impact over the next several years due to lower calory consumption related to GLP-1.
Other fast-food restaurants Jefferies rates as “buys” include Bloomin’ Brands (BLMN), Dave & Buster’s Entertainment (PLAY), and The Cheesecake Factory (CAKE).