According to Goldman Sachs, it's high time to play for a McDonald's turnaround.
Shares of the Golden Arches are flat over the past two years, as new concerns have cropped up about competition and the fast food giant's potential for growth. In January, the company changed its leadership, appointing CEO Steve Easterbrook, but hopes for a turnaround have largely gone unmet.
Yet amid a dearth of optimism and a somnolent stock chart, Goldman Sachs' options team spies opportunity.
In a Wednesday note, Goldman's Katherine Fogertey and John Marshall recommend playing the company's upcoming November analyst day by buying bullish call options. Specifically, they recommend buying the December 100-strike calls for $3.50, due to the expectation that the stock itself, and the price of options on the stock, will rise ahead of the Nov. 10 event.
Management could "provide investors with strategic initiatives at the analyst day, including any potential changes to ownership strategy, asset ownership, cost cutting, and dividend policy ... further refranchising/cost targets [are] the most likely updates," according to Goldman.
If August sounds a bit early to play for a November event, that's a key part of the strategy. Thinking back to McDonald's analyst day in May, Fogertey and Marshall wrote that "options prices ran higher into the event" and "we see the potential for a similar set up to happen this time."
While options tend to lose value as time passes, then "even if the shares do not move between now and a week before the analyst day, we estimate the calls maintain their value despite the passing of three months," given that options traders are likely to get more excited about the event as it approaches, the analysts said.
Other analysts agree that the event could be critical, serving as the next strategy session for the company's management, and potentially taking on extra importance because of the company's recent decision to reduce visibility by no longer providing monthly same-store sales reports.