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Investing.com - TD Cowen has reiterated its Hold rating and $315.00 price target on McDonald’s (NYSE:MCD), which is currently trading near its 52-week high at $313.08, as the fast-food giant reportedly prepares to implement significant price reductions on popular combo meals. According to InvestingPro data, the company maintains a GOOD financial health score, supporting its ability to implement such pricing strategies while maintaining its impressive 49-year streak of dividend increases.
According to media reports cited by TD Cowen analyst Andrew Charles, McDonald’s plans to price eight of its most popular combo meals at 15% less than the cost of purchasing items separately, with the changes expected to begin in early September. The company will also reportedly offer new limited-time $5 breakfast combos and $8 combos featuring a choice of Big Mac or 10-piece McNuggets. With annual revenue of $26.06 billion and a robust gross profit margin of 57%, McDonald’s appears well-positioned to absorb these pricing adjustments.
The Wall Street Journal reports that McDonald’s has informed restaurant operators it would subsidize those who lose money on the discounts after accounting for increased business the meals might drive, with both the company and franchisees contributing funds to market the deals.
TD Cowen notes that its proprietary survey data indicates trough value perceptions are behind McDonald’s, with value perception trends improving so far in 2025 among low-income consumers, presumably as the company prioritizes traffic over franchisee profitability.
The analyst expressed surprise at the magnitude of the reported price reductions and McDonald’s willingness to provide subsidies to impacted franchisees, suggesting these value efforts may pose more challenges to quick-service burger competitors than benefits to McDonald’s itself.
In other recent news, McDonald’s has announced a strategic move to enhance value perceptions by offering steeper discounts on its combo meals. According to a report by the Wall Street Journal, McDonald’s and its franchisees have agreed to reduce the prices of eight popular combo meal offerings by 15%. This adjustment represents a more significant discount than the previous 10-11% average, as noted by Raymond (NSE:RYMD) James research. Additionally, the fast-food giant plans to introduce new meal specials priced at $5 and $8 as part of this pricing strategy. These changes are part of McDonald’s efforts to attract more customers by providing better value for money on core menu items. The company’s decision to lower combo meal prices reflects an ongoing push to remain competitive in the fast-food industry.
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