McDonald’s and the dollar menu

The violent decline in M McDonald’s share price on Friday.
By Markets Chimp

3/2/18 11:00 PM

It was a very tough week for McDonald’s (NYSE: MCD) as the company’s share price dropped almost 9% this past week, weighing on the Dow Jones heavily, especially on Friday.

The stock nearly lost 5% on Friday alone, retreating towards USD148.27, which marked the lowest price since June 2017. The reason for such a decline is the downgrading of RBC’s analyst to the stock target price from USD190.00 to nearly USD170.00 (about 10%). The downgrading of the share’s target price is attributed to the firm’s newly-value menu, known as the $1, $2, $3 menu (See It Here)

Such a menu classifies items by price into three broad categories based on their prices. The analyst argues that the new menu is likely to attract fierce competitions to McDonald’s as competitors may go targeting every niche or category by taking on a stiff price competition. Such an impact would – from the analyst’s point of view – dampen the sales growth for the first quarter of 2018 in US to 1%, down from 3.5%.

 

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