McDonald's stock hits near 52-week low amid downgrades and lawsuit

McDonald's Corporation (NYSE: MCD) is trading near its lowest point in a year after Wells Fargo and Guggenheim Securities lowered their price targets. Wells Fargo analyst Zachary Fadem kept an Overweight rating but cut his target to $270 from $300, citing softening U.S. sales and reinvestment needs. Guggenheim's Gregory Francfort maintained a Neutral stance and reduced his target to $250 from $290, noting weaker-than-expected U.S. same-store sales and decelerating global growth.

The downgrades follow McDonald's unveiling of its NEXT strategy on Sept. 23, a multi-year plan aimed at improving menu, consumer, restaurant, and people initiatives. The company targets a low-to-mid-50% operating margin by 2030 and efficiency gains of 250 basis points. However, Wells Fargo described the strategy as 'hard to digest', highlighting unresolved pricing questions and risks tied to the rollout.

Guggenheim acknowledged McDonald's strengths, including its U.S. scale and profitable franchise model, but expressed caution about franchisee alignment with the company's initiatives. The firm also reduced its earnings estimates, projecting $13.50 per share in 2027 and $14.35 in 2028, both below consensus expectations.

Separately, McDonald's faces a proposed class-action lawsuit alleging it used an AI-powered pricing system to coordinate menu prices across franchise and company-owned restaurants. The company denied the allegations, stating that franchisees make their own pricing decisions. MCD shares are down more than 25% year-to-date, trading near $233 in Monday's pre-market session.