McDonald's Corp stock forecast: next price target – 360 USD per share

McDonald's Corp (NYSE: MCD) Q4 2024 earnings report showed steady performance. The company met its expected earnings per share but fell slightly short of revenue forecasts due to lower consumer spending and the impact of an E. coli outbreak in the US. Despite these challenges, management expressed optimism about 2025. Investor reaction to the report was positive, with shares rising 4.7%, indicating confidence in the company's long-term prospects.

This article examines McDonald's Corp, providing a fundamental analysis of McDonald's (MCD) earnings report and a technical analysis of McDonald's Corp shares, which underpins the price forecast for MCD in 2025. It also describes the company's business model, assesses the risks associated with investing in McDonald's Corp stock, and presents expert predictions for McDonald's Corp shares.

About McDonald's Corp

McDonald's Corp is the world's largest fast-food restaurant chain, founded in 1940 by brothers Richard and Maurice McDonald (McDonald Brothers) in San Bernardino, California. In 1955, Ray Kroc (Raymond Kroc) joined the company and transformed it into an international franchise. The company went public on 21 April 1965, listing on the New York Stock Exchange (NYSE: MCD).

McDonald's specialises in selling burgers, fries, beverages, and other fast-food products. The company is expanding its digital services and loyalty programs while adapting its menu to local markets.

McDonald's also owns one of the world's largest real estate portfolios. A significant portion of its profits comes from leasing properties to its franchisees, making it a restaurant business and a major player in commercial real estate.

McDonald's Corp key financial flows

McDonald's business model is unique, combining elements of the traditional restaurant industry with franchising and real estate management. The company's main revenue streams fall into four key categories:

• Franchising: many McDonald's restaurants operate under the franchise model, where the company grants its partners the right to use its brand, recipes, quality standards, and other corporate guidelines. Revenue in this segment comes from an initial franchisee fee paid by partners to open a McDonald's restaurant, as well as an ongoing percentage of sales
• Company-operated restaurants: revenue in this business comes directly from products and service sales, with the company covering all operational expenses for these locations
• Real estate income: McDonald's owns numerous properties for operating restaurants. As the landowner or leaseholder, it earns income from leasing or subleasing the land to its franchisees. In some cases, McDonald's only owns the land, while partners build and own the buildings. This strategy enables the company to generate stable and long-term income independent of the success of specific restaurants
• Supply chain and logistics: McDonald's often controls its franchisees' entire supply and procurement chain, generating additional income through markups on products and ingredients

This diversified business model allows the company to sustain long-term growth and reduce reliance on a single revenue stream. In its quarterly earnings reports, McDonald's provides separate financial data for franchised and company-operated restaurants, while income from other segments is recorded under Other Revenues.

McDonald's Corp Q3 2024 earnings report

On 29 October, McDonald's released its financial results for Q3 2024. Below is a comparison with the same period in 2023:

• Revenue: 6.87 billion USD (+3%)
• Net income: 2.25 billion USD (-3%)
• Earnings per share: 3.13 USD (-1%)
• Operating income: 3.18 billion USD (-1%)
• Revenues from franchised restaurants: 4.09 billion USD (+1%)
• Franchised restaurant occupancy expenses: 646 million USD (+3%)
• Revenues from company-owned restaurants: 2.65 billion USD (+4%)
• Company-owned restaurant expenses: 2.24 billion USD (+5%)
• Other revenues: 124 million USD (+39%)

In its commentary on the report, McDonald's management highlighted cautious consumer behaviour and inflationary pressures, which affected sales, resulting in a flat performance overall. In the US, a modest increase was recorded, with comparable sales rising by 0.3%, driven by successful promotions and menu enhancements. However, international markets saw a decline, reflecting shifts in consumer preferences.

For its Q4 2024 outlook, management did not provide specific numerical forecasts but expressed a cautious stance regarding the future economic environment. They noted that they anticipated ongoing challenges related to consumer spending and potential adverse effects from currency fluctuations, particularly in emerging markets. Despite these challenges, McDonald's leadership remained optimistic about its long-term strategic initiatives. In particular, the focus was on rebuilding consumer trust following a recent E. coli incident in the US, which had affected the brand's reputation, and strengthening marketing efforts to attract customers.

McDonald's Corp Q4 2024 earnings report

On 10 February, McDonald's released its Q4 2024 report, indicating that revenue remained unchanged compared to the same period in 2023. Below are the key financial metrics:

• Revenue: 6.39 billion USD (unchanged)
• Net income: 2.02 billion USD (-1%)
• Earnings per share: 2.8 USD (unchanged)
• Operating income: 2.86 billion USD (+2%)
• Revenues from franchised restaurants: 3.96 billion USD (+2%)
• Franchised restaurant occupancy expenses: 635 million USD (unchanged)
• Revenues from company-owned restaurants: 2.31 billion USD (-7%)
• Company-owned restaurant expenses: 1.98 billion USD (-5%)
• Other revenue: 120 million USD (+88%)

According to CEO Chris Kempczinski, McDonald's faced external challenges in Q4 2024, including a decline in consumer spending and an incident involving bacterial contamination in its products, which negatively affected overall performance. He noted that while the results were generally strong, they fell short of expectations in some international markets and customer traffic trends.

The company remains optimistic about profitability growth in 2025. Management forecasts that the operating margin will rise to a mid-to-high range, exceeding the 46.3% adjusted margin achieved in 2024. In 2025, McDonald's will focus on affordable menu options to attract budget-conscious consumers and on its global digital transformation, which has already become a key driver of revenue growth.

Despite flat revenue and net income in Q4 2024, investors responded positively to McDonald's optimistic 2025 outlook, leading to a 4.7% increase in its share price following the report's release.

Expert forecasts for McDonald's Corp shares in 2025

• Barchart: 19 out of 34 analysts rated McDonald's shares as a Strong Buy, two as a Moderate Buy, and 13 as Hold, with a target price of 360.00 USD
• MarketBeat: 16 out of 26 experts assigned a Buy rating, while 10 recommended Hold. Target price: 323.61 USD
• TipRanks: 15 out of 26 professionals recommended Buy, while 11 recommended Hold. Target price: 327.96 USD
• Stock Analysis: eight out of 26 analysts rated the stock as a Strong Buy, nine as Buy, and nine as Hold. Target price: 360.00 USD

No analysts recommend selling McDonald's shares.

McDonald's Corp stock price forecast for 2025

On the weekly timeframe, McDonald's shares are trading within an upward channel after breaking through resistance at 289 USD. Based on the current price dynamics, we assess the potential performance of McDonald's Corp stock in 2025.

The optimistic McDonald's Corp stock forecast: shares are expected to continue rising from the current level to the upper boundary of the channel at 360 USD. This scenario is the primary one, as the company anticipates improving its financial performance.

Alternative McDonald's Corp stock outlook: a break below support at 289 USD could lead to a decline towards the trendline at 270 USD. This movement would be considered a correction within the broader uptrend. A rebound from the trendline would indicate the end of the correction and a resumption of the upward trend, with a target at the channel boundary expected to reach 380 USD by that time.

Risks of investing in McDonald's Corp stock

When investing in McDonald's Corp stock, it is essential to consider the risks the company may face in 2025. Below are the key risks:

• Food safety issues: the discovery of E. coli in McDonald's products in October 2024 resulted in a 0.3% decrease in revenue in Q4, affecting consumer trust. Although the FDA confirmed no current food safety issues with McDonald's products, this incident highlighted the risks associated with foodborne illnesses, affecting both sales and the brand's reputation
• Increased competition and shifting consumer preferences: with a growing number of competitors and a consumer shift towards healthier food options, McDonald's plans to expand its chicken menu, including the return of popular items like the Snack Wrap, to meet evolving consumer expectations
• Operational challenges: the introduction of the Snack Wrap to the menu aims to boost sales in the US but could lead to operational issues due to longer preparation times, potentially affecting service speed and overall customer satisfaction
• Economic factors: inflation continues to strain consumer spending. CEO Chris Kempczinski forecasts a challenging 2025 and notes that low-income customers will likely continue facing financial difficulties, which could reduce their dining-out expenditures
• Changes in diversity and inclusivity policy: the company has announced the cancellation of previously set diversity targets for employees and suppliers, which could lead to criticism from the public

Summary

McDonald's Q4 2024 report shows the company's resilience in facing challenges, particularly the E. coli incident. Despite this, McDonald's has growth potential in 2025. Investments in automation through AI and self-service technology will improve efficiency and reduce costs. Meanwhile, menu innovations, further expansion into emerging markets, growth in the McDelivery business, and loyalty programs will strengthen customer engagement and drive sales.

The risks include high inflation, shifts in consumer habits, and the fallout from the food safety incident. Therefore, McDonald's must rebuild consumer trust through enhanced food safety measures. If the company can overcome these obstacles, it is likely to achieve growth in its financial performance in 2025.