McDonald's has been one of the worst-performing Dow stocks over the past year, down roughly 4 percent, and according to Cowen & Co.'s head of sales trading, David Seaburg, things are unlikely to change in the near term.
"I don't see McDonald's stock trading outside of its current range anytime soon," Seaburg said on Monday's "Trading Nation." The fast food giant has traded in a $10 range for the better part of the past year, hitting $87 a share on the low end and $99 a share on the high end.
"Right now it's dead money," he said. "The stock can't go meaningfully higher until sales pick up and management gets creative through some financial engineering to really unlock some shareholder value."
Sales have been lackluster for the Golden Arches, said Seaburg. "When you look at McDonald's sales comps going back to October of 2013 and compare it to its peers, you can see that McDonald's looks terrible," he said. The company's sales comps are down nearly 5 percent while the broader space is up 3 percent. "I don't think they're going to be selling more burgers. I don't see sales comps turning anytime soon. I think the real leverage here is in financial engineering."
In Seaburg's opinion, McDonald's management must do three things to increase share value: accelerate dividend growth, increase the franchise mix and buy back stock.
"The new CEO claims he's an 'internal activist,' so let's see if that really is the case," said Seaburg. "And If management succeeds in those three areas, they will get the momentum of the stock going in the right direction," he said.
"It's all a question of timing," added Seaburg. "Until then I don't see it trading above that $98 level."
McDonald's stock was up 1.4 percent to $96.22 in late trading Monday.
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