McDonald's
MCD
$242.97
+0.19%
McDonald's Corporation is the world's largest restaurant brand, operating a franchise-heavy quick-service model across more than 45,000 restaurants in over 100 markets, with roughly 62% of revenue derived from franchise royalties and rent and the remainder from company-operated restaurants split across U.S. (39% of systemwide sales), International Operated Markets (35%), and International Developmental/Licensed Markets (26%). Its competitive identity rests on unmatched global scale, real-estate ownership economics, and brand ubiquity — a defensive cash-generating franchise platform rather than a growth disruptor. The current investor narrative has turned decidedly negative: the stock has fallen more than 30% from its peak amid weak customer traffic, intensifying value-menu competition (notably Burger King's $700 million turnaround), and management's admission that elevated costs are here to stay, prompting a marketing reset and a new 'NEXT' strategic framework. Bulls counter with the 50-year dividend-growth streak, a yield near 2.8%, and a valuation at its lowest level since 2020, framing the selloff as an overreaction to cyclical consumer weakness rather than structural deterioration.…
MCD
McDonald's
$242.97
Related headlines
MCD 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on McDonald's's 12-month outlook, with a consensus price target around $292.03 and implied upside of +20.2% versus the current price.
Average Target
$292.03
0 analysts
Implied Upside
+20.2%
vs. current price
Analyst Count
—
covering this stock
Price Range
$230 - $390
Analyst target range
Coverage is robust with 29 analysts, and the consensus recommendation is 'buy' (mean rating 2.06 on a scale where lower is more bullish), with an average target price of $292.03 — implying roughly +20.2% upside from the current $242.97. That consensus leans constructive despite the brutal price action, suggesting the sell-side views the decline as overdone relative to fundamentals; the estimated average EPS of $16.65 and revenue of $29.33 billion underpin that view. However, the institutional ratings flow is mixed and largely stale: recent actions include JP Morgan maintaining Overweight, Morgan Stanley Equal Weight, Melius Research Sell, RBC Sector Perform, BMO and Evercore Outperform, TD Cowen Hold, BTIG Buy, and UBS Buy — a distribution that skews positive but with notable hold/sell dissent and few fresh upgrades, indicating conviction is not strengthening. The target range is wide — $230 low to $390 high — a spread of roughly 70% around the average, which signals high uncertainty about the turnaround. The $390 high target assumes successful execution of the marketing reset, traffic recovery, and multiple re-expansion back toward historical premium levels; the $230 low target (essentially at the current 52-week low) prices in continued traffic erosion, margin pressure from value-menu discounting, and a prolonged consumer slowdown. The wide dispersion, combined with the fact that the low target sits almost exactly at spot, means the downside is largely priced in but the upside requires a catalyst — making this a show-me story where the next few quarters of same-store sales will determine whether the consensus 'buy' is validated or the bears are proven right.
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Bulls vs Bears: MCD Investment Factors
The bear case currently has stronger near-term evidence: revenue growth of just 3.76%, a -35.95 percentage-point relative-strength gap versus the S&P 500, and a stock pinned near its 52-week low at $242.97. The bull case rests on valuation and quality — a 17.65x forward PE, 58.01% gross margins, a 2.35% covered dividend, and a $292.03 average analyst target implying +20.2% upside — but these are static advantages that have not yet arrested the downtrend. The single most important tension is whether the marketing reset and 'NEXT' framework can stabilize U.S. same-store sales traffic; if traffic inflects, the de-rated multiple re-rates quickly, but if value-menu discounting from Burger King keeps compressing margins, the 'cheap for a reason' bear thesis wins. With beta of 0.447, this is a defensive name whose recovery depends on company-specific execution rather than market direction.
Bullish
- Forward PE de-rated to value territory: MCD trades at 17.65x forward EPS of $16.65 versus a 25.47x trailing PE, a ~31% compression that puts the forward multiple below the broader market — highly unusual for a premium franchise name. The stock is at its lowest valuation since 2020, meaning much of the traffic deterioration is already discounted.
- Elite, expanding franchise margins: Q2 2026 gross margin rose to 58.01% from 55.90% in Q1, and operating margin improved to 46.51% from 44.25%, with net margin at 33.27%. These are best-in-class restaurant economics driven by the ~62% royalty/rent revenue mix, and they show pricing power even amid weak traffic.
- Analyst consensus still constructive: 29 analysts carry a 'buy' consensus (mean rating 2.06) with an average target of $292.03, implying +20.2% upside from $242.97. Even the low target of $230 sits only ~5% below spot, suggesting downside is largely priced in.
- Dividend safety and 50-year streak: The 2.35% yield is covered by a 59.7% payout ratio, and trailing free cash flow of $7.761 billion comfortably funds $1.317 billion of quarterly dividends plus $855 million of buybacks. A 50-year dividend-growth streak provides a structural bid from income investors at these levels.
Bearish
- Traffic-led growth deceleration: Q2 2026 revenue grew only 3.76% YoY to $7.10 billion, below the company's historical mid-single-digit norm, and the gain is pricing-led rather than volume-led. Management's own admission that elevated costs are here to stay undermines the margin-led recovery story.
- Severe relative underperformance: MCD is down 20.42% over one year versus the S&P 500's +15.53%, a relative strength gap of -35.95 percentage points, with a max drawdown of -32.31%. The stock sits at just 12.2% of its 52-week range ($229.20-$341.75), a classic falling-knife setup.
- PEG of 5.30 flags thin growth: A PEG ratio of 5.30 against a 25.47x trailing PE signals that near-term earnings growth is very thin relative to the multiple. Even the forward PE of 17.65x requires consensus EPS of $16.65 versus a depressed quarterly run-rate, leaving little room for execution error.
- Value-menu war with Burger King: Burger King's $700 million turnaround is paying off for Restaurant Brands International, intensifying discount competition just as MCD's traffic weakens. Discounting to defend share directly pressures the 46.51% operating margin that underpins the bull case.
MCD Technical Analysis
MCD is in a sustained, broad-based downtrend, with the 1-year price change at -20.42% and the 6-month change at -21.96%, badly lagging the S&P 500's +15.53% over the same year (relative strength of -35.95 percentage points). At $242.97, the stock sits at roughly 12.2% of its 52-week range ($229.20 low to $341.75 high) — perilously close to the lows, a positioning that historically signals either capitulation/value opportunity or a falling knife, and the -32.31% max drawdown confirms this is a deep correction rather than a shallow pullback. The YTD decline of -19.88% versus SPY's +11.93% underscores how decisively capital has rotated away from this defensive name. Short-term momentum remains weak but is showing tentative stabilization: the 1-month change of -2.25% is a marked deceleration from the 3-month decline of -9.24%, and the last week has seen a bounce from $230.88 (Oct 7) to $242.97 (Oct 16), a roughly 5.2% rebound off the recent trough. Still, relative strength is negative across every window (-3.47 over 1 month, -11.93 over 3 months), meaning the stock is underperforming even as it bounces — a classic sign of a bear-market rally rather than a trend reversal. The 1-month trend diverging less negatively than the 1-year trend hints at mean-reversion pressure, but without volume confirmation (7.24M shares) or an RSI reading, conviction in a bottom remains low. Key support sits at the 52-week low of $229.20, with the recent $230.88 close forming a de facto double-bottom zone; a breakdown below $229 would open fresh downside and likely trigger momentum-driven selling. Resistance is layered at the $260-$270 area (the August/September shelf) and ultimately the $341.75 52-week high, which is now roughly 41% above spot and would require a full trend reversal to reclaim. The beta of 0.447 is a critical risk-management input: at less than half the market's volatility, MCD is a low-beta defensive holding, meaning position sizing can be larger for equivalent risk budget, but it also explains why the stock has not participated in the market's rally — and why a breakout above resistance would be a meaningful signal of a regime shift in investor sentiment toward staples.
Beta
0.45
0.45x market volatility
Max Drawdown
-32.3%
Largest decline past year
52-Week Range
$229-$342
Price range past year
Annual Return
-20.4%
Cumulative gain past year
| Period | MCD Return | S&P 500 |
|---|---|---|
| 1m | -2.2% | +0.2% |
| 3m | -9.2% | +2.9% |
| 6m | -22.0% | +8.4% |
| 1y | -20.4% | +14.9% |
| ytd | -19.9% | +11.9% |
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MCD Fundamental Analysis
Revenue is growing but at a modest, decelerating pace: Q2 2026 revenue of $7.10 billion rose 3.76% year-over-year from $6.843 billion in Q2 2025, continuing a steady climb from $6.517 billion in Q1 2026 and $7.009 billion in Q4 2025. The sequential trajectory ($6.52B → $7.10B) shows seasonal strength, but the low-single-digit YoY growth reflects soft traffic and pricing-led rather than volume-led gains. Segment data shows High-Growth Markets at $3.603 billion and the U.S. at $2.827 billion as the two largest revenue pools, with International Developmental Licensed Markets at $669 million — meaning international growth markets, not the mature U.S. base, are the incremental growth engine, and any U.S. traffic deterioration is a direct drag on the largest single profit pool. For a franchise model, 3.76% top-line growth is below the company's historical mid-single-digit norm and underscores the turnaround imperative behind the marketing reset. Profitability remains elite: Q2 2026 net income of $2.362 billion on a 33.27% net margin, with gross margin at 58.01% and operating margin at 46.51% — margins that are best-in-class for the restaurant industry and reflect the franchise/rent royalty model's high incremental economics. Margins are stable-to-expanding: gross margin rose from 55.90% in Q1 2026 to 58.01% in Q2, and operating margin improved from 44.25% to 46.51%, while net income grew from $1.983 billion to $2.362 billion sequentially. The company is solidly profitable with no loss trajectory to worry about; the debate is about growth durability, not solvency. Balance sheet and cash flow present a mixed but manageable picture: trailing free cash flow is $7.761 billion, Q2 operating cash flow was $2.81 billion against $834 million capex (FCF of $1.976 billion), and the company returned capital aggressively via $1.317 billion in dividends and $855 million in buybacks in the quarter. However, the current ratio of 0.955 signals tight short-term liquidity, and the negative debt-to-equity (-30.61) and ROE (-478%) reflect a deeply negative equity base driven by decades of buybacks — a capital-structure artifact, not distress, but one that makes book-value metrics meaningless. Interest coverage of roughly 8.1x and a 2.35% dividend yield with a 59.7% payout ratio indicate the dividend is well covered by earnings, though the high payout plus buybacks leave limited cushion if FCF compresses.
Quarterly Revenue
$7.1B
2026-06
Revenue YoY Growth
+3.8%
YoY Comparison
Gross Margin
58.0%
Latest Quarter
Free Cash Flow
$7.8B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is MCD Overvalued?
Because net income is positive ($2.362 billion in Q2), the PE ratio is the appropriate primary metric: MCD trades at a trailing PE of 25.47x versus a forward PE of 17.65x, a roughly 31% compression that implies the market expects meaningful earnings growth (consensus EPS of $16.65 versus the trailing figure implied by the depressed quarterly run-rate). The forward multiple of 17.65x is the more decision-relevant number and, notably, sits below the broader market's multiple — unusual for a premium franchise name and a signal that the selloff has de-rated the stock to value territory. On a PS basis, MCD trades at 8.11x sales and 8.14x EV/sales, with EV/EBITDA at 18.54x — rich absolute multiples that reflect the franchise model's high margins but that have compressed from prior peaks. Peer comparison is constrained by the absence of an explicit industry-average multiple in the provided valuation data, but contextually MCD's forward PE of 17.65x and EV/EBITDA of 18.54x are at the low end of its own historical band and likely at or below restaurant-sector norms for a scale leader; the PEG ratio of 5.30, however, flags that near-term growth is thin relative to the multiple, a key bear argument. Against its own history, the de-rating is stark: the PE ratio has fallen from 25.70x in Q4 2024 and 26.29x in Q4 2023 to 25.47x trailing today, while the forward multiple of 17.65x is near multi-year lows, and the PS ratio of 8.11x compares to historical quarterly PS readings in the 27x-37x range (though those appear computed on different share/period bases and should be treated cautiously). The stock is trading at its lowest valuation since 2020 per recent commentary, which the bulls frame as a value opportunity and the bears as justified de-rating given decelerating traffic — the truth likely hinges on whether the marketing reset stabilizes same-store sales.
PE
25.5x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 20x~30x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
18.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on decelerating top-line growth against a rich absolute multiple. Revenue grew only 3.76% YoY in Q2 2026 to $7.10 billion, and the growth is pricing-led rather than traffic-led, meaning any consumer trade-down accelerates the deceleration. The current ratio of 0.955 signals tight short-term liquidity, and with a 59.7% payout ratio plus $855 million of quarterly buybacks, free cash flow of $7.761 billion has limited cushion if margins compress. Interest coverage of roughly 8.1x ($3.302 billion operating income against $409 million interest expense) is adequate but not fortress-like, and the deeply negative equity base (-30.61 debt-to-equity) makes book-value metrics meaningless as a safety anchor.
Market and competitive risks are dominated by valuation compression and the value-menu war. At 25.47x trailing and 18.54x EV/EBITDA, MCD still trades at premium absolute multiples that could compress further if growth stays in the low single digits; the PEG of 5.30 quantifies how little growth supports the price. Burger King's $700 million turnaround is directly eroding MCD's value positioning, and discounting to defend share pressures the 46.51% operating margin. With beta of 0.447, MCD is insulated from broad market swings but equally excluded from rallies — its -35.95 percentage-point one-year relative-strength gap versus the S&P 500 shows capital rotating decisively away from defensive staples.
Worst-case scenario: U.S. traffic continues eroding through the marketing reset, forcing deeper discounting that compresses operating margins below 44%, while international growth markets slow and the consumer weakens further. In that chain, the forward EPS estimate of $16.65 gets cut toward the low end of $15.23, and the multiple fails to re-rate, driving the stock to the 52-week low of $229.20 — roughly -5.7% from $242.97 — and potentially toward the analyst low target of $230. A break below $229 would open fresh momentum-driven selling, and a retest of the -32.31% max-drawdown trajectory implies a realistic downside of -15% to -20% (roughly $195-$207) if the bear case fully plays out.