On Monday, Stifel, a financial services firm, revised its price target for McDonald’s Corporation (NYSE:), a leading global fast-food chain. The price target was lowered from $265.00 to $257.00, while the Hold rating on the stock was maintained. The adjustment comes in the wake of McDonald’s reporting second-quarter earnings that fell short of market expectations. The company posted an earnings per share (EPS) of $2.97, which was below the $3.04 estimated by Stifel and the consensus of $3.07.

McDonald’s recent performance showed weak comparable sales (comps) across all three of its business segments. Despite the introduction of promotions like the $5 Meal Deal in the United States, which performed better than anticipated, same-restaurant sales (SRS) remained negative in July. Stifel’s analysis suggests that the company may be entering a challenging period where its ability to attract customers will be tested, particularly as it tries to leverage its scale, brand equity, and consumer insights.

The past few years have been favorable for franchisors like McDonald’s, benefiting from a sustained post-pandemic recovery in customer traffic and the ability to increase franchisee prices to offset global inflation. These measures have been advantageous for rent and royalty revenues, as franchisors have not been directly exposed to the escalating input costs.

Stifel’s commentary indicates that it is crucial for McDonald’s to demonstrate its capability to adapt to a changing consumer landscape in the upcoming quarters. There is a risk that the gains made in previous years could be negated if the company cannot effectively navigate this new environment. The revised 12-month price target of $257 reflects Stifel’s current assessment of McDonald’s stock value in light of these factors.

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