McDonald’s Stock Has Slipped. One Analyst Sees 21% Upside.

McDonald’s stock has slipped lately, but one analyst expects it to rise. (Joe Raedle/Getty Images)

McDonald’s stock has seen a 10% pullback since May 19, but UBS analyst Dennis Geiger remains upbeat about the shares in a Friday note.

Shares of the hamburger chain are up 1.3% in Friday trading while the S&P 500 is up 0.7%.

Despite sluggish fast-food sales this year and pressured low-income consumers, Geiger believes McDonald’s should see improving sales trends in the second half of the year in both the U.S. and international markets.

The fast-food giant appears well positioned to deliver solid sales growth later this year, he wrote, driven by the rollout of new products such as McCrispy Strips and Snack Wraps, value deals like the $5 Meal Deal, and Buy One Get One for $1, as well as upcoming marketing plans.

McDonald’s plans to expand the operating hours at the majority of its U.S. restaurants to late night starting this summer and introduce some CosMc’s space-themed beverages in stores. The firm also plans to continue opening new units around the globe at a 4% to 5% annual pace. All these should help drive sales at the firm.

Geiger believes McDonald’s is “a quality business positioned for multiyear market-share gains,” and expects its earnings to grow by high-single-digit percent in the coming quarters. The stock is now trading at 22 times the estimated earnings in 2026. Geiger has a Buy rating on McDonad’s, and a $350 price target, implying a 21% upside.

Wall Street is generally as bullish as Geiger. The 37 analysts polled by FactSet have a consensus target price of $331. Still, the sentiment has been souring lately.

Earlier this month, McDonald’s shares got three downgrades in a row as some analysts remain concerned about the appetite-suppressing GLP-1 drugs, pricing fatigue from consumers, and the stock’s expensive valuation compared with peers.

This week, a consumer activist group is also calling for a seven-day boycott against McDonald’s, accusing the Golden Arches of tax avoidance, lobbying against wage increases, and rolling back diversity practices. If the negative sentiment sticks, it could further dent the company’s sales and the stock’s valuation.

Write to Evie Liu at evie.liu@barrons.com