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McDonald's - AI Stock Analysis

Analysis generated March 16, 2024

McDonald's Corporation is a global fast-food chain that was founded in 1940. The company operates and franchises McDonald's restaurants, which serve a locally-relevant menu of quality food and beverages sold at various price points in more than 100 countries. McDonald's is known for its consistency and value, and it has built a strong brand reputation that extends to virtually every corner of the globe. The company's business model is predominately franchised-based, which provides a steady stream of franchisee-derived income while minimizing operating risks.

Fundamental Analysis

Financials for McDonald's Corporation indicate that the revenue for the last quarter was $6.41 billion. While this is an 8.09% increase over the same quarter last year, showing positive year-over-year growth, there is a 4.27% decrease compared to the previous quarter, which raises concerns. Net income paints a similar picture; at $2.04 billion for the last quarter, it shows an increase of 7.12% year over year but has dropped by 12.00% from the preceding quarter. EBITDA at $3.37 billion, has increased by 7.93% on a yearly basis but has decreased by 10.35% since last quarter. The company's P/E ratio of 24.39 is within a normal range, which suggests that the stock may be adequately valued at current earnings. However, recent insider sales could indicate that those with intimate knowledge of the company anticipate a less favorable future.

Technical Analysis

The technical indicators off late are not so bullish for McDonald's. The stock price today at $279.14, has decreased by 3.87% compared to last month, yet there has been an increase of 6.82% over the past year, highlighting a positive long-term trend. Currently, the Simple Moving Average for 10 days (SMA10) stands at 289.29, which is lower than the preceding SMA10, signaling potential declines. The Relative Strength Index (RSI) at 85.7 points toward an overbought and potentially bearish condition, which may indicate a short-term pullback or consolidation phase for the stock.

Alternative Data Analysis

The alternative data for McDonald's sheds light on some additional operational aspects that may influence the stock. A reduction in job postings by 11% might signify either an efficient cost-cutting measure or a troubling sign of decreased growth prospects. The company's business outlook from employees is neutral, posing neither a significantly positive nor negative influence on the stock. In terms of customer acquisition and engagement, there has been no significant change in webpage visits at 28M or Instagram followers at 5.1M in the recent months. However, a decrease of 7% in mobile app downloads could point to a drop in customer interest or market penetration, which may be a potential red flag for investors looking at growth metrics.

Conclusion and Recommendation

The analysis of McDonald's Corporation stock presents a mixed view. On the one hand, the company shows strong year-over-year growth from a fundamental perspective, and it maintains a solid international presence with a vast number of franchises. Conversely, the recent quarterly decreases in revenue, net income, and EBITDA, along with insider selling, suggest that there may be internal expectations of challenging times ahead. Technical analysis indicates potential short-term volatility, with an overbought RSI and a downward trend suggested by the SMA10. Alternative data poses concerns on the customer growth front but shows stable customer engagement levels on social platforms.

Given the above, my recommendation would be a Hold for current investors due to the strength of the McDonald's brand and its large market share, which are likely to continue providing resilience in the face of economic fluctuations. Potential investors should keep a close eye on the company's next quarterly results and watch for any signs of improving fundamentals and technicals before considering an entry point. It is essential to review the impact of macroeconomic factors, consumer trends, and internal company strategies that may affect performance moving forward.