Key Takeaways:
- McDonald’s is navigating a challenging consumer environment through strategic value initiatives and digital transformation.
- MCD stock could reasonably reach $372/share by December 2027, based on our valuation assumptions.
- This implies a total return of 27% from today’s price of $294/share, with an annualized return of 11% over the next 2.2 years.
McDonald’s (MCD) is confronting one of its most challenging operating environments in recent years. Low-income consumers, who typically visit more frequently, are cutting back on restaurant visits.
Yet the Golden Arches continues to demonstrate resilience through its franchise-led business model, digital loyalty platform, and systematic approach to value and affordability.
In the second quarter of 2025, McDonald’s achieved global comparable sales growth of nearly 4%, driven by positive guest counts worldwide despite industry headwinds.
The company’s Internationally Operated Markets (IOM) segment reported 4% comparable sales growth, with all markets posting positive results. International Developmental Licensed Markets grew comp sales by more than 5.5%, led by Japan.
Under the leadership of CEO Chris Kempczinski, McDonald’s has prioritized three critical elements: value and affordability, menu innovation, and world-class marketing execution.
The company’s “Accelerating the Arches” strategy focuses on restaurant modernization, consumer engagement through digital platforms, and operational transformation.
McDonald’s operates primarily through a franchised model, with franchisees running the vast majority of its restaurants globally.
It generates revenue through franchise fees, royalties, and sales from company-operated restaurants. This asset-light model yields industry-leading operating margins of nearly 47%.
MCD stock has been a consistent performer over decades, weathering multiple economic cycles through brand strength and operational excellence.
Here’s why McDonald’s stock could provide attractive returns through 2027 as it addresses near-term challenges while building long-term digital capabilities.
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What the Model Says for MCD Stock
We analyzed the upside potential for McDonald’s stock using valuation assumptions based on the company’s value strategy evolution, digital platform expansion, and ability to navigate the bifurcated consumer environment.
The opportunity ahead for McDonald’s centers on fixing value perceptions in the U.S. market while maintaining momentum internationally.
Management acknowledges that consumers driving up to restaurants and seeing combo meals priced over $10 creates negative value perceptions, particularly among the 50% of customers not using the McValue platform or loyalty program.
Internationally, McDonald’s has established strong foundations. All major IOM markets now feature both meal bundles and everyday affordable price (EDAP) menus with items typically priced below $4 (or euros/pounds).
These markets have also demonstrated pricing discipline despite high inflation, with pricing increases in the low single digits, even as input costs, such as beef, have risen by 20% in Europe.
Based on estimates of 5% annual revenue growth, 48% operating margins, and a normalized P/E valuation multiple of 23x, the model projects McDonald’s stock could rise from $294/share to $372/share.
That would be a 27% total return, or an 11% annualized return over the next 2.2 years.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for MCD stock:
1. Revenue Growth: 5%
McDonald’s delivered modest 1.7% revenue growth in the most recent fiscal year, reflecting the challenging consumer backdrop. The U.S. business grew comp sales 2.5% in Q2, outperforming competitors on comp sales and guest counts, but overall QSR traffic remained under pressure.
Looking forward, growth drivers include expanding the digital loyalty platform (currently at 185 million 90-day active users globally, targeting 250 million by the end of 2027), accelerating new restaurant development with approximately 2,200 net openings planned for 2025, and improving value perception through core menu pricing adjustments in the U.S.
We forecast 5% annual revenue growth, reflecting McDonald’s ability to capture market share through improved value positioning while managing industry headwinds including continued pressure on low-income consumers and overall QSR traffic weakness.
2. Operating Margins: 48%
McDonald’s achieved an adjusted operating margin of nearly 47% in the first half of 2025, demonstrating the durability of its franchise-led business model.
Management continues to target a full-year adjusted operating margin in the mid-to-high 40% range, exceeding the 46.3% achieved in 2024.
The franchise model provides natural operating leverage, with franchise margin performance driving the majority of restaurant margin growth.
Digital and technology investments are beginning to yield benefits through improved operational efficiency, though these remain in early stages.
Management has made strategic investments in modernizing the business through new finance systems, HR platforms, and global business service centers in India and Mexico.
The company targets G&A at approximately 2.2% of system-wide sales for the full year. Interest expense is expected to increase by about 4% compared to 2024, at the low end of previous estimates. The effective tax rate is targeted at 20-22% with some quarterly volatility.
We estimate 48% operating margins based on the strength of the franchise model, modest operating leverage from digital initiatives, and management’s track record of disciplined cost management, even as it invests in strategic priorities.
3. Exit P/E Multiple: 23x
McDonald’s stock currently trades at a forward earnings multiple of 22.9x, reflecting its quality franchise model and global brand strength.
Historical P/E multiples have averaged 24.3x over the past year, 24.1x over three years, and 24.8x over five years, indicating relative stability.
We apply a 23x exit multiple, roughly in line with current valuation and recent historical averages. This reflects several considerations. McDonald’s represents one of the highest-quality business models in the restaurant industry, with predictable cash flows, minimal capital requirements, and global diversification.
The brand remains culturally relevant, given McDonald’s was recently named the Most Valuable Global Restaurant Brand by Kantar for the seventh consecutive year.
The company’s Minecraft Movie partnership represented its largest global campaign to date, driving increases in guest count across more than 100 markets.
The 23x multiple reflects McDonald’s quality business model and brand strength while accounting for near-term execution challenges and consumer pressure that will take time to fully resolve.
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What Happens If Things Go Better or Worse?
Different scenarios for MCD stock through 2030 show varied outcomes based on value strategy execution and consumer recovery: (these are estimates, not guaranteed returns):
- Low Case: Continued consumer weakness and execution delays → 6% annual returns
- Mid Case: Successful value repositioning and digital expansion → 11% annual returns
- High Case: Consumer recovery and accelerated digital benefits → 15% annual returns
Even in the conservative scenario, McDonald’s stock offers reasonable returns supported by its defensive business model and consistent cash generation.
The company’s franchise model provides downside protection, as franchisees absorb much of the operating risk while McDonald’s collects relatively stable royalty streams.
The upside case for MCD stock could deliver superior performance if McDonald’s successfully addresses core menu pricing concerns in the U.S. while accelerating loyalty program adoption and benefiting from an improvement in consumer sentiment.
Key indicators include U.S. comp sales momentum, growth in loyalty program membership, and the trajectory of operating margins.
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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 stocks mentioned. Thank you for reading, and happy investing!
