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McDonald's Stock Deep Dive Analysis: MCD price target at $200 on high valuation, flat revenues

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Our stock deep dive of the week focuses on McDonalds $MCD stock. Chief Equity Analyst ivanbrian9 is bearish on the fast food giant as inflation and recession fears remain in place. Full DCF analysis includes price target and rating: stocks trading

Recent McDonald's news and earnings

As expected McDonald's mentioned currency impacts during the call, and we expect these to continue given the ongoing strength of the dollar. McDonald's took a charge of just over $1 billion from exiting Russia. The next earnings are scheduled for October 24. What is of particular interest is the number of downward revisions in the past three months. There were 17 downgrades versus just 14 upgrades to earnings estimates.

The two charts below show historical comparisons for McDonald's valuation. The average price/earnings going back 20 years is 19. It is trading more or less in line with the overall restaurant sector. All sectors appear to be in line for a rerating lower though if current economic forecasts for inflation and interest rates prove accurate. If we look at other metrics, they also look too high.

McDonald's trades at eight times sales. Over the past 20 years, the average is nearer to four. The recent move up is a causative effect of years of monetary stimulus.McDonald's technical analysis

 

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