McDonald’s saw its stock plummet to $264.09 on July 15, marking its lowest point in two years. This steep decline represents a staggering 22.45% drop from its peak of $341.75 in March, officially placing it in bear market territory.
This week, a flood of analyst downgrades has contributed to the fast-food giant's woes. A key moment came when Redburn Atlantic altered its rating from buy to sell, citing potential losses due to GLP-1 weight-loss drugs that could lead to a staggering 28 million fewer visits, translating to about $482 million in lost revenue annually.
KeyBanc has also adjusted its expectations for McDonald’s upcoming second-quarter results, projecting U.S. same-store sales growth at a mere 0.5%, compared to the consensus estimate of 1.1%. International sales predictions were similarly lowered.
High-profile price target cuts followed swiftly, with Citigroup reducing its target from $375 to $335, and Morgan Stanley lowering theirs from $331 to $322. Concerns are not limited to McDonald’s; other major stocks, like Tesla, have also faced sell recommendations.
The declines have come at a time when the company was already struggling. Lower-income customers are visiting less frequently, and franchisees are highlighting that the $5 value meal leaves little room for profit. McDonald’s gross margins have dipped from 58% to 56% in recent months.
In terms of technical analysis, the weekly chart illustrates the extensive damage inflicted by a five-month decline. McDonald’s previously lost key support levels, with the latest drop testing the Fibonacci retracement level at $264.55. Falling below this could indicate further decline, potentially reaching the low of $243.53 recorded in July 2024.
Moreover, the momentum indicators reflect a concerning situation. The weekly Relative Strength Index (RSI) dropped below 31, a significant low not seen since October 2023. Historically, such dips have corresponded with major long-term stock recoveries, suggesting that despite current challenges, there may be potential for future rebounds.
This article is for informational purposes only and should not be considered financial advice.
