McDonald’s, Chipotle, and Starbucks are on Wells Fargo’s list of top restaurant picks

Wells Fargo released its restaurant sector preview as the calendar gets close to rolling to 2025. The firm has a constructive view in general on restaurant stocks after seeing improving channel checks and noting a more benign pricing dynamics.

Analyst Zachary Fadem and his team named McDonald’s (NYSE:MCD) their top large cap restaurant pick for the new year. Notably, recent checks show traffic improving and the E. coli case is closed. Fadem thinks McDonald’s (MCD) U.S. comparable sales can return to the low single-digit growth range at the end of Q4. Looking further ahead, the McValue platform, the return of Snack Wraps, easier sales comparisons, reasonable valuation, and re-rating potential are all seen setting up MCD for a rally.

Wells Fargo also hiked its estimates on Chipotle (NYSE:CMG) after the chain confirmed an incremental 2% national price increase. The firm also kept an Overweight rating on Starbucks Corporation (SBUX) on the view that 2025 expectations are still low, recent data has inflected positive, and the company can navigate through commodity distractions.

Meanwhile, Brinker International (NYSE:EAT) was upgraded by Wells Fargo to an Equal-weight after being tagged previously with an Underweight rating. Fadem and his team pointed to the positive impact of new management initiatives at the restaurant company, such as menu simplification, advertising, and social media efforts.