Bernstein SocGen Cuts McDonald's Target Amid Franchisee Concerns

Analysts at Bernstein SocGen Group have lowered their price target for McDonald's (NYSE:MCD) stock to $310 from $340, while maintaining a Market Perform rating. The current trading price of $283.70 is near its 52-week low of $282.15 and down 17% from its 52-week high of $341.75.

The firm expressed concern that franchisee economics may compress and lead to a deceleration of the business, citing average store cash flows remaining at $500,000 as 'very healthy.' U.S. company-operated restaurants are underperforming, prompting management to rethink the optimal ownership structure, which might indicate pressures that could later show up more broadly across the system.

The firm warned that franchisees could accelerate prices or reduce service levels in a worst-case scenario, potentially further straining traffic. However, they noted that initiatives such as crafted sodas and refreshers, as well as the partnership with FIFA in the second quarter, may drive traffic and support average check.