Key Takeaways
- Five funds cut or sold their McDonald’s stakes in Q2, and three of them sold every share, according to their latest 13Fs.
- Two of the sellers added Yum! Brands, Chipotle Mexican Grill and Starbucks over the same quarter, and all three trade at higher multiples than McDonald’s.
- McDonald’s trades at 20x forward earnings, against a five-year average of 24x, and analysts expect its earnings to grow about 6% a year through 2028.
- I wouldn’t follow the sellers at this price, and U.S. guest counts in the Nov. 4 report are the number to watch.
Five big funds cut or sold their stakes in McDonald’s (MCD) by June 30, their latest 13Fs show, and the stock has kept sliding since. The burger chain reports its third quarter on Nov. 4, so anyone holding it has to decide whether to follow them out the door.
The same filings show two of those sellers adding Yum! Brands (YUM), Chipotle Mexican Grill (CMG) and Starbucks (SBUX) over the quarter.
Three funds sold every share
The 13Fs cover the quarter ended June 30 and were filed Aug. 13 and 14.
Ilex Capital Partners (UK), a fund with $4.9 billion in US stocks, had 4.6% of its 13F stocks in McDonald’s at March 31. Cartenna Capital, a $2.7 billion fund, had 3.0%, and Lee Ainslie’s Maverick Capital, a hedge fund whose firm manages $16 billion, had 1.1%. By June 30, all three held none.
The other two trimmed. Andreas Halvorsen’s Viking Global, a hedge fund whose firm manages $78 billion, cut its stake 22%. It still held 2.83 million shares worth $765 million at June 30, which made up 2% of its 13F stocks and was its 14th-biggest position. NS Partners, a $5.9 billion fund, cut 65%, down to 41,072 shares, or 0.5% of its 13F stocks.
McDonald’s is down 15% from its March 31 price, the last quarter-end on which the three sellers reported owning it, and down 2% from its June 30 price. A 13F doesn’t show what any of them sold at.
TIKR tracks 33 analysts on McDonald’s. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on McDonald’s, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See McDonald’s’ Analyst Ratings
McDonald’s has a traffic problem
U.S. comparable sales rose just 0.8% in the second quarter, against 2.5% a year earlier, and guest counts fell. Management expects U.S. comparable sales to come in slightly negative for the third quarter, after a slightly negative July and August.
Its fix won’t be cheap. At its Sept. 23 Investor Day, McDonald’s committed about $8.5 billion of rent relief and capital through 2036 to help franchisees upgrade their restaurants. It also said it expects flat industry traffic while inflation stays high. The stock fell as much as 7% that day.
The sellers’ new picks cost more
Ilex opened a stake of 1.02 million Yum! Brands shares, its fifth-biggest position at 3.3% of its 13F stocks. It also added 14% to Chipotle, which made up 3%. Cartenna opened a stake of 460,000 Starbucks shares, 2% of its 13F stocks.
Chipotle has backed up the traffic case since: third-quarter comparable sales rose 2.1% on 0.8% more transactions, its third straight quarter of traffic growth. Starbucks’ U.S. comparable sales rose 7.7% in its fourth quarter, though transactions grew only 2.4%, with the average ticket up 5.2%.
All three cost more than McDonald’s. On forward earnings, Starbucks trades at about 33x, Chipotle at 26x and Yum at 25x, against McDonald’s 20x.
Do the numbers back the sellers?
Analysts expect McDonald’s normalized EPS to climb from $12.20 in 2025 to $14.47 in 2028, about 6% a year:
Those estimates have come down, though. The 2027 figure is about 5% lower than it was a year ago.
Investors are paying a lot less for those earnings than they usually do. McDonald’s 20x is well below its five-year average of 24x:
At the Sept. 30 quarter-end it hit 18x, its lowest quarter-end reading since 2014.
Wall Street has cut its targets along with the stock. The consensus target is $292, down from $330 a year ago:
That’s still 10% above the last close, across the 33 analysts who cover the stock.
I wouldn’t follow them now
In hindsight, selling looks smart, with the stock 15% below its March 31 price. But following the funds today means selling at 20x, closer to the stock’s five-year low of 18x than to its 24x average. McDonald’s doesn’t need that multiple to recover, either: hitting the 6% a year of earnings growth analysts expect would be enough. And in September it raised its dividend for the 50th straight year, by 4% to $1.93 a quarter.
If U.S. traffic keeps shrinking, analysts will likely cut their estimates again, and the franchisee money won’t pay back fast.
Frankly, at this price I’d rather hold McDonald’s than chase Starbucks at 33x.
Watch U.S. guest counts in the Nov. 4 report, and the outlook for the fourth quarter. After that, the funds’ 13Fs for the quarter ended Sept. 30, due by Nov. 16, will show us whether Viking kept selling.
So what is McDonald’s stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what McDonald’s could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
