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Wall Street is lovin’ McDonald’s newest menu item. Analysts at several firms have this week told clients that the return of the Snack Wrap — the fan favorite that was originally discontinued in 2016 — has been positive for the fast food giant. Investors hope the excitement around the product’s return will help boost sales in the new quarter and can provide a jolt for an underperforming stock. The third quarter “has gotten off to a strong start helped by the relaunch of Snack Wrap,” Evercore ISI analyst David Palmer wrote to clients in a Thursday note. U.S. same-store sales are tracking for a growth rate of around 7% in the third quarter, he said. However, Palmer forecasts 3% growth for the period, given the potential for a sluggish August. Barclays also said it expects the wrap to help lift traffic, a factor that prompted analyst Jeffrey Bernstein to declare McDonald’s his top-pick stock among quick-service restaurants. Anecdotal evidence underscores the excitement around the wrap’s return. Social media checks show anecdotes of locations selling out of the menu item and seeing unusually high foot traffic following its release, according to Wolfe Research. “We think excitement for Snack Wraps … positively contributed to brand buzz/momentum to start 3Q,” Greg Badishkanian, head of Wolfe’s consumer team, wrote to clients on Tuesday. Evercore’s Palmer said McDonald’s has found a recipe for success with the product. It’s an item that has been highly requested and comes at a “compelling” price of $2.99, the analyst said. On top of that, he pointed out that it plays into the trend of consumers focusing on protein in their snacks. MCD .SPX 3M mountain McDonald’s vs. S & P 500, 3-months To be sure, the Snack Wrap’s comeback is happening amid a tough point for the stock. Shares have underperformed the S & P 500 by 19 points since May and have seen relatively weaker gains on the year. Despite that muted action, Wall Street is optimistic. The average analyst polled by LSEG has a buy rating and expects shares to rise more than 10% over the next year. Wells Fargo analyst Zachary Fadem said investors can anticipate second-quarter same-store sales to turn positive. Then, current-quarter commentary will be in focus and should be positive given the performance of Snack Wraps thus far, he said. “We’re buyers here,” Fadem said in a Thursday note.
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