UBS: McDonald's (MCD.US) - Risk-Reward Attractive on Pullback, With Brand Well Positioned Globally
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UBS views the recent share price pullback in McDonald's as an attractive entry point, maintaining a Buy rating with a target price of $320. The firm emphasizes that the brand remains exceptionally well-positioned globally, with long-term growth drivers remaining intact despite short-term macroeconomic pressures. The current valuation implies approximately 15% upside to the target.
McDonald's shares retreated roughly 10% due to slowing same-store sales growth in the United States. However, international markets, particularly in the Middle East and Asia, continue to deliver robust performance. Digital initiatives and delivery channels remain key growth catalysts, now contributing over 40% of total sales.
Effective cost control measures are expected to push operating margins above 45% in 2025. Furthermore, ongoing share repurchase programs, projected at $3 billion for 2025, should support earnings per share growth. Trading at roughly 17 times forward EV/EBITDA, McDonald's sits below its historical average valuation, presenting a compelling risk-reward profile.
The $320 target price is based on approximately 20 times 2026 estimated EV/EBITDA. Downside risks include further weakness in consumer spending and escalating labor costs, though UBS notes these factors appear partially priced in. International outperformance or improving domestic sales could serve as key catalysts moving forward.