McDonald’s: Should You Keep Lovin’ It?
The market was lovin’ it Monday, but whether to buy, sell or hold McDonald’sstock is another story, “Fast Money” traders said.
“I still have an outperform rating,” said Bryan Elliott, an analyst at Raymond James.
“Maybe I’m being irresponsible, but I don’t think so.”
The fast-food franchise experienced an 18.59 percent year-to-date increase for 2011, with EPS of $5.10.
The stock flirted with its 52-week high of $96.59 Monday, pulling back slightly to close at $95.35. Its 52-week low was $72.14.
Elliott expressed confidence that management would be able to guide MCD through its global exposure to a worldwide recession.
“This is still a long-term growth story,” he said, touting the company as a powerful global brand. “They still have a long way to go to penetrate most of the emerging markets.”
Even in Europe, the chain has been posting mid-single-digit increases in same-store sales.
Elliott said he believed this trend would continue due to McDonald’s product lineup, various price points and upgraded facilities, providing “a great value for the dollar.”
Elliott also weighed in on two other competitors:
Chipotle : Underperform rating on its valuation risk. Elliott said the company had done “an extraordinary job,” but that it was going to be hard to sustain its current valuation.
Panera Bread : Outperform, but it’s getting closer to Elliott’s price target. He added they were in “a sweeter spot in its growth curve,” having moved into TV advertising.
Trader Tim Seymour also leaned bullish on McDonald’s, noting the 700 new restaurants slated for China.
“I’d almost make an argument that McDonald’s is a value play here, relative to its peer group,” he said.
Seymour pegged Wendy’s at over 50 and Yum! Brands at 24 times earnings.
“I’ve got McDonald’s with a 40 ROE and a 3 percent div yield,” he said. “Tell me anyone who comes close to that. Otherwise you can stay in this trade.”
Trader Dan Nathan pointed to increasing competition.
“I don’t know how these guys grow in North America when you have Five Guys popping up everywhere and Larkburger,” he said. “I see some of these specialty fast-food burger places, In-N-Out Burger, are going to take a bite out of them here, so they better be growing overseas.”
Nathan said investors might consider stock replacement by buying calls. “They’re very cheap right here.”
Investment pro Stephen Weiss said it pays to keep MCD in a portfolio but preferred Coca-Cola.
“It’s got a similar yield, and the PE is substantially less,” he said. “Now, they don’t have the growth rate, but talk about a global brand that’s also a defensive holding.”
- Jim Cramer’s Stocking Stuffer: McDonald’s
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Trader disclosure: On Dec. 5, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Seymour is long AAPL; Seymour is long MCD; Seymour is long RIG; Adami owns C; Adami owns GS; Adami owns INTC; Adami owns MSFT; Terranova is long EMC; Terranova is long SU; Terranova is long NCR; Terranova is long UPC; Terranova is long TRLG; Terranova is long VRTS; Terranova is long LQD; Terranova is long MUB; Terranova is long AXP; Terranova is long IBM; Terranova is long HES; Terranova is long CAT; Terranova is long SWN; Terranova is long CNI; Terranova is long DECK; Terranova is long SBUX; Nathan has Dec put fly AAPL; Nathan has Jan put spreads MS; Nathan has Jan call fly NFLX; Nathan has Jan put spreads INTC; Weiss is long QCOM; Weiss is long MOS; Weiss is long EUO; Weiss is long DE; Weiss is long CNX; Weiss is long COP; Weiss is long CSC; Weiss is long VZ; Weiss is long KO; Weiss is long MDRX; Weiss is long SHAW; Nations is long SPY; Nations has long call spreads AMZN; Nations is long MSFT; Gartman is short EUR; Gartman is long X; Gartman is short AMZN; Dicker is long RI For Bryan Elliott For Ray Wang For Natali Morris
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