Recession could be a great thing for Mcdonald’s (MCD) stock – Idaho Reporter


Recession could be a great thing for Mcdonald’s (MCD) stock

What a title that is. How can I even dare to wright something like this? Here is the breaking news for you. The U.S. economy is in the gutter and the recovery will be slow and inconsistent. Restaurants in the affluent communities will probably get back on their feet sooner than later but the situation in the downtown is different.

First coronavirus and now the protest and looting crippled the small business owners who have limited finances. They are the first to exit the restaurant game. Some of the will probably end up in McDo flipping the burgers.

Fed chief Jerome Powell sees the US in a severe crisis. In his opinion a significant portion of the job losses could be permanent, gastronomy included, because in the USA countless restaurants are on the brink. The big chains like McDonald’s (NYSE:MCD) are likely to benefit.

According to the Independent Restaurant Coalition, 85% of independent restaurants may go out of business by the end of 2020 if they do not receive financial aid from the state. The industry complains that the Paycheck Protection Program is only designed for two months. It would make much more sense to set up a stabilization fund of around $ 120 billion.

In the U.S. and other countries, restaurants are allowed to reopen, but the requirements are very strict. This means that guests are not allowed to sit too close together, which inevitably significantly reduces sales.

Recently, the number of guests in restaurants has increased again, but the development is still dramatic.

Is MCD stock a buy right now?

McDonald’s is hit by the crisis hard, but they are more organized and with enough cash on their hands to weather this crisis. After all, McDonald’s employs 200,000 people and ensures that suppliers such as Coca-Cola and agricultural companies do business. Let us not forget that MCD is a much cheaper restaurant than the ones owned by small business owners. Sure, the food is tasteless and you do not get the fine dining experience, but who cares about that when you are out of job and uncertain future.

Furthermore, McDonald’s could be a beneficiary of the crisis, as enemies could drop out en masse. This is also the view of the analysts who recently issued a series of purchase recommendations. Bernstein, for example, sees the price target at $ 230.

At the end, institutional investors hold a majority ownership of MCD stock through the 69.45% of the outstanding shares that they control, and institutional shareholders rarely sell big name stocks, especially the ones that will recover.

After the previous recession (2008) it took MCD stock only 2 years to double in price(from $50 to $100) but then we waited another 8 years to see the digits doubled again. So, if history repeats itself we could see MCD double in 2 years from now.

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