Morgan Stanley sees McDonald’s stock as both offensive and defensive amid tough market trends

On Tuesday, Morgan Stanley (NYSE:MS) maintained its Overweight rating on McDonald's Corporation (NYSE:MCD) shares but slightly reduced the price target from $340.00 to $336.00. The adjustment follows a review of the company's performance and future outlook, amid variable demand trends and a food safety incident in the fourth quarter of the previous year. With a current market capitalization of $201.33 billion and trading at $280.95, McDonald's stock is currently trading at fair value according to InvestingPro analysis.

Despite the challenges faced in the latter part of the year, the fast-food giant showed signs of improvement with new value offerings and market share gains during the second half. Looking ahead to 2025, McDonald's is expected to intensify its efforts in the United States and other key markets, where conditions have been difficult. The company maintains a strong financial position with a "GOOD" Financial Health Score and has demonstrated remarkable consistency with 49 consecutive years of dividend increases, currently offering a 2.52% yield.

Analysts at Morgan Stanley believe that while the competition for value-conscious consumers remains fierce, McDonald's stands out among its quick-service restaurant peers. The firm anticipates McDonald's will exhibit stronger comparable sales compared to its main competitors.

With a beta of 0.73, the stock has historically shown lower volatility than the broader market, making it an attractive defensive play. InvestingPro identifies 8 additional key investment factors for McDonald's - unlock these insights and access the comprehensive Pro Research Report covering 1,400+ top stocks at InvestingPro.

Additionally, in terms of expansion, McDonald's has been largely successful in executing its growth plans, contrasting with some of its peers who have encountered obstacles. The revised price target is based on a 25 times multiple of the projected 2026 earnings per share, which is slightly higher than the current multiple of around 22 times.

In conclusion, despite the price target reduction, Morgan Stanley continues to view McDonald's as a strong candidate within the sector, offering both offensive and defensive investment qualities.

In other recent news, McDonald's Corp has seen a series of significant developments. The company announced the upcoming retirement of board member John J. Mulligan, set to take effect at the 2025 Annual Shareholders' Meeting.

Despite a slight underperformance in same-store sales growth in the fourth quarter of 2024, Loop Capital maintains its Buy rating on McDonald's stock. BMO Capital Markets spotlighted McDonald's as a top restaurant stock pick for 2025, due to its potential for strong sales growth and market outperformance.

Bernstein, a market analysis firm, recognized McDonald's for its value propositions and industry performance, while expressing caution about restaurant concepts with international exposure. Piper Sandler maintained its neutral stance on McDonald's, acknowledging steady growth and a solid dividend yield.

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