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McDonald’s is getting burned as consumers begin to change their habits, according to Redburn Atlantic. The investment firm double downgraded the fast food giant to sell from buy. Analyst Chris Luyckx also slashed his price target to $260 from $319, which signals downside of about 15% from Monday’s close. That marked the third downgrade for McDonald’s in less than a week. Morgan Stanley on Monday lowered its rating on the stock to equal weight from overweight . On Friday, Loop Capital cut McDonald’s to hold from buy. “Weight-loss drugs are reshaping restaurant demand – not only by suppressing appetite, but also through behavioural spillovers. Lower-income users cut fast-food spending by 14%, double that of higher-income users, with the sharpest declines at lunch and dinner,” Luyckx wrote. MCD YTD mountain MCD YTD chart “These changes often extend to household and group habits, creating network effects that amplify over time. Brands with high US exposure and a reliance on group dining and lower-income consumers are most at risk,” he added. The analyst also pointed to “cracks” in McDonald’s value proposition, noting that the company has seen seen softening traffic in the past two quarters among lower- and middle-income consumers, two core constituencies for the company. “The implication is clear: McDonald’s’ ability to repeat its previous recessionary outperformance is in question,” Luyckx added. “Unless the brand can reassert its value leadership — either through sharper price-point offerings or renewed menu and format innovation — its historical defensive status may no longer hold.” Despite the recent downgrades, most analysts polled by LSEG remain bullish on the stock. Of the 38 who cover it, 22 rate it a buy or strong buy. Another 16 have a hold rating.
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