BofA Incrementally Bullish On McDonald's

BofA Securities turned incrementally bullish on McDonald's Corp MCD after proprietary data signaled limited-service restaurant sales accelerated in August.

The McDonald's Analyst: Gregory Francort maintains a Buy rating on McDonald's stock with a price target lifted from $225 to $250.

The McDonald's Thesis: BofA credit and debit card data shows that industry-wide quick-service sales growth accelerated by 20 basis points in July to 12.2% per household. The international segment also showed a "sharp recovery" in July and suggests the company can mostly offset challenges in key global markets.

Related Link: Travis Scott Promotion At McDonald's Promotes Addictive Food, Says Health Expert

McDonald's promotion with rapper Travis Scott is "another bright spot" for the company although Francort said it's difficult to model promotional sales lifts into estimates. Nevertheless, the fast-food chain succeeded in implementing a "well-thought-out" campaign that resonates well with the younger consumer.

The fact that the promotion focused on an already existing menu item with some customization was also well thought out from an operational point of view.

The research firm's revised $250 price target is based on 19.5 times EV/EBITDA multiple on 2021 estimates, up from a prior 18 times multiple. The increased multiple is due to an improved outlook and expectations for better top-line growth compared to its peers.

MCD Price Action: Shares of McDonald's closed higher by 1.5% at $226.07.