McDonald’s (NYSE:MCD) Stock: Value Comeback, Dividend Power, $350+ Target
With shares down 10%, MCD trades below fair value. We break down margins, product strategy, and expansion plans backing a strong recovery | That's TradingNEWS
Strong Value Strategy Positions NYSE:MCD For Resilient Growth
Shares of NYSE:MCD are trading at $292.00, having pulled back nearly 10% since mid-May. The McValue platform's $5 Meal Deal, Buy One Get One for $1, and mobile app offers are part of a broader strategy targeting inflation-hit consumers. France posted its first market share gain in three years via €4 Happy Meals, while Germany’s McSmart Snacks menu under €3 drove growth. These low-entry price points are resonating strongly across Europe.
In Q1 2025, revenues dropped 3.5% Y/Y to $5.956 billion, with global comps down 1%. Stripping out the Leap Day effect, comps were flat. U.S. comps declined 3.6%, mainly due to a decline in lower-income traffic. However, comps rose 3.5% in International Development Licensed Markets, particularly in Japan and the Middle East. Even with ongoing sensitivity surrounding the Israel-Palestine conflict, the rebound in Middle Eastern markets suggests sentiment is recovering.
NYSE:MCD Unlocks Margin Upside As E. Coli Costs Fade
Margins improved despite weaker top-line performance in the U.S. Restaurant margin expanded 20 bps to 55.6%, and adjusted operating margin rose 70 bps to 45.6%. The E. coli-related expenses from late 2024 are now non-recurring, setting up cleaner comps and enhanced leverage. With 95% of stores franchised, NYSE:MCD enjoys structural insulation from many operational risks.
Cost optimization continues through automation, with self-order kiosks and digital integration reducing labor strain. Over the past 12 months, McDonald’s generated $9.5 billion in operating cash flow and $6.7 billion in free cash flow. This cash engine funds innovation, dividends, and new store growth without over-reliance on external capital.
Global Expansion And Menu Innovation Bolster Long-Term Sales Trajectory For NYSE:MCD
Innovation extends beyond price. The return of Snack Wraps on July 10 and the continued rollout of McCrispy Chicken Strips are expected to spark renewed customer visits. Beverage innovation through CosMc’s pilots—now entering traditional locations—is aimed at boosting margin mix.
McDonald’s plans to expand by 900 stores in the U.S. by 2027, bringing the global total to 50,000. Late-night operations are also being expanded across U.S. outlets to boost unit economics during underutilized hours. The 100-market Minecraft marketing campaign, already yielding strong customer re-engagement, reflects McDonald’s renewed brand resonance among younger demographics.
Dividend Power And Valuation Suggest Compounding Returns From NYSE:MCD
The dividend story is robust. McDonald’s offers a $7.08 annualized dividend (2.39% yield) and has raised payouts for 49 straight years. The 10-year dividend CAGR of 7% and 20-year CAGR of 14% reflect an elite shareholder-friendly capital return philosophy.
Valuation remains reasonable. At $292, the stock trades at 23.5x FY26 EPS of $13.30 and 20.1x FY27 EPS of $14.50. Consensus expects 8.4% CAGR in EPS through 2027. Reverting to a 26.5x historical P/E average implies upside to $350+. Jefferies’ $360 and UBS’s $350 targets support this thesis, while FactSet’s consensus stands at $331.
Headwinds Remain, But NYSE:MCD Maintains Defensive Edge
Despite its strengths, risks include rising use of GLP-1 weight-loss drugs potentially curbing QSR demand, consumer activism on tax and DEI issues, and valuation compression risk. Three analyst downgrades in June signal caution. Still, MCD’s operating margin exceeding 43%, consistent brand reinvention, and a structurally sound global model preserve its moat.
Verdict: NYSE:MCD Is A BUY On Pullback, Targeting $350+
With the stock down nearly 10% from its highs, and pricing at just 20x FY27 EPS, the current entry point is compelling. A rebound in comps, driven by menu reinvention, expanded hours, and aggressive value packaging, supports a medium-term upside target of $350. Including the 2.39% dividend, NYSE:MCD offers over 10% total return potential and a clear BUY rating for long-term investors.
