Why some say it’s time to buy beaten-down shares of McDonald’s

Fresh off their worst day in more than a year, McDonald's shares could be an attractive pick at current levels, some technical and fundamental analysts contend.

The stock was seeing a moderate bounce in early Wednesday trading, after a 3.2 percent shellacking Tuesday. The drop was reportedly a reaction to a report from data tracker M Science projecting lower third-quarter sales than are currently anticipated by Wall Street analysts.

But some analysts say that even if sales in the U.S. slip due to the storm damage sustained in Texas and Florida, other countries will pick up the slack.

In a Wednesday research report, Mizuho analyst Jeremy Scott wrote that he is taking down third-quarter U.S. comparable sales estimates "due to prolonged weather impacts from Harvey & Irma," but actually increased his price target on the now-$158.64 stock to $173 from $170 due to a bevy of positive factors: "an accelerated run rate of store growth in China, the launch of a [ready-to-drink] coffee partnership with Coke, and FX tailwinds."

From a chart perspective, Evercore ISI technical analyst Rich Ross notes that the shares are still sharply higher on the year; indeed, with a 29.5 percent year-to-date gain, it is the fourth-best performer in the Dow Jones industrial average.

"That's a fantastic run for the stock, and I don't think that run ends," Ross said Tuesday on CNBC's "Trading Nation."

He observed that the stock appears to be holding its 50-day moving average, which comes in at about $156, and said the level might be expected to serve as "support."

"If you break $156, you could test $152 in the short term," Ross granted. "But it doesn't diminish the fact that this is an extremely strong stock that likely has upside from current levels."

With a nod to the classic advertising tagline for Paul Masson wine, the technical analyst added: "I would sell no fries before their time, and I think McDonald's is a buy on weakness."


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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