MCD

Keeping a mind cold and distant from political preferences is one of the essential qualities to succeed in the market. And so, be it another revolutionary and boosting Trump rally or just a simple Kamala's "no major changes, continue to buy" trend, it's clear for me from every angle that most popular retail networks would form a kind of safe haven for a wary part of the crowd on Wall Street. Even if you don't, personally, visit budget shopping centres like Walmart (WMT) and Target (TGT) or you don't have family dinners at fast-food restaurants like McDonald's (MCD), then many other people will try to minimize their daily spending needs in this way. Life becomes more expensive to help discount stores in their business. Beside these considerations, big holiday savings with early Black Friday and Thanksgiving sales season to buy must-have gifts long before Christmas signify not a little.

As a good example, shares of Target (TGT) are now pricing with a double-digit discount even against their summer highs, which was a quick response to solid earnings on August 21. I guess this fundamental gap may be filled soon, even on bright expectations before the store chain's Q3 report, which is scheduled on November 20. Although Walmart (WMT) is currently trading with no discount but rather near its all-time highs, the bullish positioning in it still provides me with a dreamy smile because of refreshing historical records month by month. As I believe, the next pair of Walmart's announced quarterly earnings and its own updated forecasts on November 19 and in the middle of February 2025 is not going to disappoint the bulls. Improving profit based on more or less effective cost reductions in supply chains and growing AI assistance for online customers will accumulate much of the latest achievements of autumn and winter sales season. If so, I just keep my price target at $100 for Walmart (with more than 20% of an additional award to bless me), plus set $175 to $195 (16% to 30% vs the current price) as a midterm area to climb for Target shares.

As for McDonald's, the best-ever numbers of profit only a week ago corresponded to a 8.7% surplus QoQ on record three-month revenue of $6.87 billion. And only the impact of temporary negative effects from the E. coli outbreak, which had been revealed several days before that, prompted MCD share price to retrace further from its recent highs around $318 to around $290. This formed an 8.5% discount on MCD shares. I believe that the E.coli story would be short-lived. It was reportedly linked to Quarter Pounder burgers that killed one person and sickened nearly 50 others. The menu item was "rather quickly" (according to the U.S. Centers for Disease Control and Prevention) excluded from a fifth of 14,000 restaurants across a dozen U.S. states. The onion used was blamed later. Many expect fast rebuilding for consumer trust with further progress in capturing a wider market share. Therefore, the price may not only recover back to $318 but climb further to $325 at least, in my humble opinion. Meanwhile, some large investment funds are keeping their price goals for McDonald's even in a higher range up to $340.

In the past, two notable E. coli outbreaks at Chipotle Mexican Grill in 2015 and Jack in the Box in 1993 had hurt sales at those chains. Chipotle needed about a year-and-a-half to stabilize the number of its visitors, while Jack in the Box sales declined for four straight quarters. Chipotle shares kept the negative mood until 2018, but due to some more cases of norovirus infections after the initial E. coli outbreak in 2015. To estimate possible damage for the market dynamics in MCD shares, most analysts now expect that the Christmas quarter sales of McDonald's could experience some pressure, but it probably would not be as hard as the previous two E. coli cases that I mentioned here. Therefore, my personal conclusion was to buy some stocks of MCD in the current range from $290 to $295, with an intention to add more if the price may go to retest the levels around $275 or a bit lower. I do not believe seriously in larger damage to the stock.

Instead of worse expectations, I bet on McDonald's ability to introduce a comprehensive and attractive value platform, plus new limited-time offerings (LTOs), already in the first quarter of 2025 to boost customers' visits. Analysts at Goldman Sachs follow the same strategy, saying that "subdued international consumer demand" might pressure sales, but McDonald's is expected to emerge as a "winner" by gaining its market share "compared to its quick service restaurant (QSR) peers", supported by "the growth of its loyalty program and increased digital engagement". Their ratings for MCD now reflects an approximately 10% potential upside to the stock, based exactly on my $325 price target, but over "the next 12 months", while I expect MCD will hit before the end of winter of in the beginning of spring maybe, helped by lower interest rates environment and price conscious consumers. By the way, MCD price added more than one percentage point today, despite all odds. I would not be surprised if all the assets listed above, including MCD, would perform a rapid surge in share prices very soon after the election fever will be over.