McDonald’s (NYSE:MCD) stock is now trading at an historically high premium to rivals, a valuation that Morgan Stanley’s Brian Harbour believes leaves the hamburger chain vulnerable if pressure on the quick-service restaurant sector intensifies.
The premium, Harbour says, prices McDonald’s (NYSE:MCD) as a “more-defensive” stock if the economy slows, an outlook that may no longer be the case.
“Pricing power has eroded” at McDonald’s (NYSE:MCD), especially with lower-income consumers facing spending pressures. And the proliferation of GLP-1s creates “structural shifts in consumers’ taste” that will further compress growth.
Harbour downgraded McDonald’s (NYSE:MCD) to Equal-weight from Overweight and trimmed his price target by 1.5% to $324.
“McDonald’s is a top-quality business but hasn’t been, and probably will not be, insulated from some structural pressures on fast food. We see the stock closer to fair value and move to Equal-weight.”
Shares are down ~1% Monday, extending the stock’s losing streak to a sixth consecutive day.
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