BMO: McDonald's is at all-time highs, and could go a lot higher

McDonald’s stock hit an all-time high Friday April 21 of $US133.86. And according to BMO equity analyst Andrew Strelzik, the stock could go higher still. Strelzik initiated coverage of McDonald’s on April 21 with an “Outperform” rating and $US153 price target, implying 15% of potential upside.

“We believe MCD is an attractive investment as a premium brand in the early stages of a turnaround in business momentum with a favourable risk/reward profile,” he said in a note to clients.

BMO says that one key driver of McDonald’s future growth will be menu changes. These include more burger sizes like the new Mac Junior, the introduction of fresh, not frozen beef, $US1 soft drinks, $US2 McCafes, and further perfection of McDonald’s all day breakfast, which has been a huge success.

BMO says that McDonald’s is on the verge of buying back stock equivalent to 10-15% of McDonald’s market cap over the next two years.

McDonald’s is also speeding up its technology initiative, adding more computerised ordering kiosks to more locations, Strelzik said. McDonald’s will add ordering kiosks to 2,500 US locations by the end of 2017 and nearly all locations by 2020. Additionally, McDonald’s has been investing in its app, and is expected to rollout a “pay and pick up” feature like the one Wendy’s is testing now.

McDonald’s is also planning to re-franchise China operations which will make for better international margins.

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