McDonald’s Corporation (NYSE: MCD) is rolling out its revamped dollar menu, with items priced in $1, $2 and $3 tiers. Shareholders are hoping its newly-launched value menu will make the restaurant’s stock a value as well, and analysts are optimistic about the menu’s potential impact.
McDonald’s has brought back its dollar menu for the first time in six years after experiencing a high degree of success with its popular McPick 2 promotion in 2017. The new dollar menu will include cheeseburgers and sausage burritos for $1, two-piece chicken tenders and McCafe drinks for $2 and Sausage McMuffins with Egg and Classic Chicken Sandwiches for $3, among other items.
Several Wall Street analysts have come out in favor of the dollar menu’s return, including Nomura analyst Mark Kalinowski. Earlier this week, Kalinowski named McDonald’s Nomura’s top restaurant stock pick of 2018.
“Given McDonald’s strong same-store sales momentum, we raise our target multiple on the stock to 27 (from 26),” Kalinowski said, according to CNBC.
Nomura also raised its earnings per share forecast for 2017 from $6.53 to $6.55. Kalinowski raised his 2018 and 2019 EPS estimates by 12 cents each.
Jefferies analyst Andy Barish says technology and value will be a powerful one-two punch for MCD stock in coming years. In addition to ramping up pricing pressure on competitors with its new dollar menu, McDonald’s has also been working on boosting its sales via mobile and kiosk ordering. McDonald’s installed ordering kiosks in more than 2,500 restaurants nationwide in 2017 as part of its Experience of the Future initiative.
Stephens analysts estimate that McDonald’s generates 10 percent more sales from kiosk orders than traditional counter orders.
“We find the combination of digital, remodels and delivery (with UberEats) will make a 3 percent U.S. same-store sales result very visible with potential upside depending on how quickly initiatives gain traction,” Barish says. “Additional efforts around national value, quality, premiumization and beverages could layer additional sales.”
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