Wednesday, November 28, 2012

McDonald’s Downgrade - Discussion Topic 11/28/2012;_ylt=Anbwmea2Wwaakpllj9EqU5SiuYdG;_ylu=X3oDMTRiZTJpM2tyBG1pdANGUCBDb21tZW50YXJ5IGFuZCBBbmFseXNpcwRwa2cDZGIyM2I0NTMtM2RlYy0zMWY1LWFjYTItYjJhZjA4ZmVlNjhlBHBvcwMzBHNlYwNNZWRpYVNlY3Rpb25MaXN0BHZlcgNlYzQ0MThmMi0zN2VlLTExZTItYTJkNS0zY2Q5MmJmZjIwMTY-;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3
Is 2012 a temporary setback for McDonald's, or will same-store sales, and the stock price, continue to struggle?


  1. Tim Shoji
    The article mentioned that globally, McDonald's operating income has been hurt by the foreign exchange rate against the dollar. Indeed, despite several rounds of QE, the US dollar continues to be the "safe haven" currency internationally. Given that the Euro sovereign debt crisis still poses a lot of uncertainty (n.b. Greece just barely reached a deal for the short term), the Japanese economy is in recession, and the RMB is difficult to get access to, the US Dollar should remain relatively strong in the near future. Since McDonald's acknowledges that the exchange rate to be unfavorable to its operating income at least until the next quarter, I'd be very interested in knowing whether they have a tradition of managing their exchange rate risks through hedging.

  2. Glenn Alpert
    McDonalds used to be the one and only fast food chain in the US, but now faces plenty of competition. I read in the other article that McDonalds has 34,000 stores worldwide; eventually, the stock cannot continue to go up. This is one reason why I don't follow stocks too much; companies that are growing will generally continue to increase their stock price until they cannot hit earnings estimates; the only issue is "when will this happen". Simply because a Lazard analyst cut his rating on McDonalds does not mean it is a bad company, it simply means that this analyst feels the stock price is overvalued by the market.

  3. Xiao Zhong
    The falling SSS reached McDonald’s historical low in a decade, indicating consumers’ lack of confidence in its products and growth. I think its SSS dropped in such a timing mainly due to macro economy and competition. The overall inflation led to rising labor and input costs such as corn, bread and meat, making McDonald’s struggling to achieve high margins; many new competitors throng into the market, providing good quality food at cheaper prices, thereby attracting many of McDonald’s customers.

    I think McDonald’s is facing a transition from traditional fast food provider to promoting more healthier options, as many consumers are complaining of obesity issues, especially with McDonald's' food. So if it can further take advantage of this opportunity to rebrand itself, McDonald’s would still have the hope to take back some of the market share.

  4. Zhishuo Zhang
    The stock price MCD is in its downward trend. It dropped below the 50 and 100 day moving average line. However, this trend doesn't seem to be perminent, because 50 MA is moving around 100 MA instead of moving further away.

    MCD is still a good company with strong financial status. Except negative revenue growth, the rest of the financial statment seems fine. However, like Xiao mentioned, as people are more concerning their health, how MCD brand itself in the future will be a tough problem, and that's a problem faced by the whole fast food industry. Personally, I do believe the necesscity of the fast food. Therefore, even people badmouthing fastfood, I don't think it will have a huge impact on MCD in the near future.

  5. Amine Bensaid
    The short-term outlook for MCD seems to be on the downside for various factors:

    -Strong competition
    -Slow U.S. growth
    -European soverein debt crisis
    -Geopolitical instability

    The company stock is in oversold territory, I think the short-term trend can be broken anytime for MCD if the above factors improve. Also MCD is still improving its expenditure in the emerging markets, which in theory should boost the companies returns if the BRIC countries CAGR is sustained.

  6. Tian Tan
    I think the current sales downward trend is temporary. MCD has been around for a long time and has proved its ability to adjust itself to succeed.
    MCD should be able to recover and its performance should be in line with the long run macro economic growth.

    However, MCD should be alert to the fact that younger generation may favor healthier food which MCD is regarded as opposite and that their price may no longer be competitive in the fast food market.