MCDON - Stocks

Min Spread *
Target Spread *
Swap point Long/Short
-4.46 / -4.46
Nominal Value of one lot
Trading hours
16:30 - 23:00

Instrument description

People all over the world crave and love to eat fast food, and one place which is a benchmark in the fast-food industry is none other than ‘McDonald’s.’ The fast-food industry is quite popular and has grown tremendously because it is convenient, inexpensive, and food tastes delicious.

McDonald’s is an American company recognized as the world’s largest fast-food chain restaurant. McDonald’s trademark logo, ‘Golden Arches,’ is one of the most popular and successful logo of a business company. McDonald’s passed $100 billion in annual sales for the first time in 2019. McDonald’s has a staggering 38,695 restaurants in over 100 countries, and 13,846 restaurants are in the US.

According to facts, a new McDonald’s opens every 14.5 hours, and the fast-food chain feeds almost 70 million people in every part of the world. Ray Kroc founded McDonald’s in 1955, but the idea and name of the restaurant were of two brothers Richard and Maurice McDonald, who opened a restaurant in San Bernardino, California, and McDonald’s originally sold hot dogs instead of hamburgers.

McDonald’s offers a special meal for kids, and the company is also the largest distributor of toys. McDonald’s earns more than $75 million every day and spends more than $1 billion on media advertising. Outside the US, McDonald’s has most, 3000 restaurants in Japan, while the 10 busiest McDonald’s restaurants are all in Hong Kong. McDonald’s developed the concept of ‘Drive Thru’ in the restaurant industry, and first of such a restaurant was opened in Sierra Vista, Arizona, in 1975.

Originally, the French Fries was not included in the menu, but now McDonald’s serves more than 9 million pounds of French Fries every day across the globe, and almost 8% of the potatoes grown in the US are made into fries and used in McDonald’s restaurants.

McDonald’s has the largest market share in the fast-food industry, with a 43% share in the US and 10% globally. McDonald’s is headquartered in Chicago, and the company has almost 1.7 million employees, which makes McDonald’s the second largest employer after Walmart.

History of McDonald’s

Richard McDonald and Maurice McDonald were two brothers who opened a barbecue restaurant in San Bernardino, California in 1940. Ray Kroc got the rights and permission to establish McDonald’s restaurants in different places of the country.

Ray Kroc opened the first McDonald’s restaurant on April 15, 1955, and the company is also incorporated as McDonald’s Corporation. The company was headquartered in Oak Brook, Illinois, but moved to Chicago in 2018.

In 1960, the iconic ‘Golden Arches’ are used in an advertising campaign called ‘Look for the Golden Arches.’ In 1961, Ray Kroc got the control of McDonald’s from the two brothers Richard and Maurice for a deal worth $2.7 million. The primary mascot ‘Ronald McDonald’ is introduced in 1963, which is as famous today as the Golden Arches.

McDonald’s started to trade publicly in 1965, and Initial Public Offering was set at $22.50 per share. The first McDonald’s restaurant outside the US was opened in British Columbia, Canada, in 1967. The iconic ‘Big Mac’ debuts in 1968. The breakfast menu was introduced along with Egg McMuffin in 1973.

The first Ronald McDonald restaurant was opened in Philadelphia in 1974. McDonald’s pioneered the Drive-Thru in 1975 in Sierra Vista, Arizona. In 1979, McDonald’s launches the ‘Happy Meal’ for kids. In 1983, the Chicken McNuggets were added to the menu. In 1985, McDonald’s becomes one of the 30 companies that become a member of the prestigious Dow Jones Industrial Average (DJIA).

In 1998, McDonald’s makes its first acquisition by putting a stake in another small, fast food restaurant called ‘Chipotle Mexican Grill,’ which was based in Colorado. In 1999, McDonald’s makes another acquisition by purchasing Donatos Pizza Inc. In 2000, McDonald’s bought Boston Market fast-food chain that had filed for bankruptcy.

In 2002, McDonald’s reported the first quarterly loss since going public due to restructuring cost, which was almost $853 million. In 2003, McDonald’s sold Donatos Pizza in order to focus on the hamburger segment, which was its core business. The popular McDonald’s ad ‘I’m Loving It’ was launched in 2003 and became an instant success all over the world. In August 2007, McDonald’s sold Boston Market to Sun Capital Partners.

In March 2017, McDonald’s introduced a new growth strategy that aimed at three key points, which were customer experience, delivery, and digital service; the strategy was called ‘Velocity Growth Plan.’ The main goal of the strategy was to retain old customers and make new customers, and it was a success as McDonald’s witnessed the best comparable sales figures in the last six years.

In January 2018, to fight growing competition in the food and beverage segment from rival brands such as Yum Foods and Dunkin Brands Group, McDonald’s introduced value meals with a price range of $1, $2, $3. In 2019, McDonald’s acquired Dynamic Yield, which was a firm developing artificial intelligence (AI) solutions, and the aim was to use AI technology to optimize the Drive-Thru service and boost efficiency.

Current Business and Investment of McDonald’s

McDonald’s Corporation operates and franchises the restaurants under the name ‘McDonald’s.’ The standard menu that the company offers includes chicken products, a variety of beef and chicken burgers, breakfast food, milkshakes, wraps, ice cream, soft drinks, and desserts. The popular meals that are served in McDonald’s include ‘Happy Meal,’ ‘Big Mac,’ and ‘McFlurry.’

McDonald’s is a giant company and operates in numerous segments that include the US, International Lead Markets, High Growth Markets, Foundational Markets, and Corporate.

  • The US segment manages operations of all the restaurants located in the US. This segment also allows customers to customize their meals.
  • The International Lead Markets segment overlooks the management of operations in various international countries such as United Kingdom, Australia, France, Canada, and Germany
  • The High Growth Markets concern with the operations in other international countries that includes Italy, Russia, Poland, Korea, China, Switzerland, Spain, and the Netherlands.
  • The Foundational and Corporate segment is responsible for the opening of restaurants and providing convenience to customers through delivery and Drive-Thru service.

The popular products that McDonald’s offers and serves are

  • Big Mac
  • Fillet-O-Fish
  • Chicken McNuggets
  • Quarter Pounder with Cheese
  • McDonald’s Fries
  • McFlurry desserts
  • Chicken sandwiches
  • Sundaes
  • Salads
  • Milkshakes
  • McCafe Beverages
  • Soft drinks
  • Ice cream cones

Almost 80% of McDonald’s restaurants all around the world are based on a franchise concept and managed by qualified and experienced entrepreneurs. The revenue of McDonald’s constitutes of fees from franchises, from sales, and royalties.

Risk and Potential in McDonald’s Environment

McDonald’s generated nearly $22 billion in revenue in 2019, from which more than half was due to franchised restaurants and rest from company-operated restaurants. McDonald’s operating income was $9.07 billion, net income was $6.03 billion, and total assets were $47.5 billion in 2019.

McDonald’s is one of the oldest and most trusted names in the food and beverage sector, and the company has a strong brand value, which is recognized in every country of the world. SWOT analysis is a common management tool used by every organization to evaluate its business performance, so steps can be taken to solve the problems and add to the growth of the company. The SWOT analysis of McDonald’s is given by

  • Strengths

McDonald’s is a global brand name and dominant in the fast-food industry with more than 35,000 restaurants and serving in over 120 countries. McDonald’s serves a wide range of products, from burgers, breakfast options, to salads and desserts. The company is known for its quick service through the Drive-Thru system, where a person gets his desired meal in 3 and a half minutes. All over the world, McDonald’s is known for its quality of food, hygiene, and excellent customer service. McDonald’s takes pride in giving similar tastes to customers, no matter if they are in the US, France, Italy, or Japan. The company is known for its exciting advertisements, and it spends nearly $1 billion on media advertising. McDonald’s also is a major sponsor of major global events, particularly regarding sports.

  • Weaknesses

McDonald’s is frequently criticized for offering food products that are high in sugar and fat content, which promotes obesity in people of all ages. McDonald’s has also had to face litigation matters regarding animal rights and the environment. McDonald’s has stuck with a few core products, but the consumer preferences keep on changing, and the company must offer new and quality offerings. The fast-food market is getting saturated, which is resulting in a loss of market share, income, and revenue.

  • Opportunities

McDonald’s can expand and diversify its product line and offer new meals to the customers. The company could increase its outlets in emerging economies where there is a constant demand of fast food among the population. McDonald’s could invest and offer healthier food products and cater to people who avoid fast food altogether due to the risk of obesity. McDonald’s should run more Corporate Social Responsibility (CSR) campaigns to increase awareness of taking care of the environment. The company can sign joint ventures with popular supermarkets to expand its franchise operation.

  • Threats

McDonald’s faces numerous challenges in the form of economic recessions, competitors, and fluctuating currency rates. McDonald’s is a dominant name in fast food but faces competition from Kentucky Fried Chicken (KFC), Subway, Dominoes, Pizza Hut, Taco Bell, Burger King, Papa Johns Pizza, Wendy’s, Chipotle, and Starbucks. McDonald’s has to pay huge amounts in compliance with food regulations and environmental policies. McDonald’s sales and revenue are also affected by a large population that avoids fast food for health reasons.

Stock Analysis of McDonald’s

McDonald’s is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbols ‘MCD.’ The company is listed under the ‘Consumer Services’ Sector, and the industry is ‘Restaurants.’ McDonald’s is also a member of other indices such as the Dow Jones Industrial Average (DJIA), S&P-100 Index, and S&P-500 Index.

The all-time high share price of McDonald’s was $221.15 on August 9, 2019, and the average price in the last 52 weeks is $195.71.

McDonald’s reported revenue of $163 billion and a net income of $1.6 billion, with an 11% rise in the last three months of 2019. In the first quarter, earnings fell by 17%. In late February to early March of 2020, the Coronavirus pandemic forced the closure of restaurants not only in the US but globally as people were asked to stay indoors and practice social distancing to stop the virus from spreading.

In the second quarter of 2020, the revenue of McDonald’s fell 30% to close at $3.76 billion, and Earnings per Share (EPS) fell 66% to 66 cents, which was even below the expectations. The net income of McDonald’s was $438.8 million. The global sales due to Covid-19 also fell almost 24% in the second quarter while the sales in the US were less and declined only 8.7% as the majority of the restaurants were opened for Drive-Thru and delivery services.

Analysts predict that McDonald’s EPS will fall another 26% to $5.82 in 2020, but there are chances of stock value surging again to $8.21 per share in 2023. McDonald’s has done many purposeful acquisitions and investments recently, which can help the company reap the benefits and profit in the future. The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.

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