1. Arcos Dorados Holdings Inc. (NYSE:ARCO)
Price Target Upside: 38.75%
Number of Hedge Fund Holders: 19
Arcos Dorados Holdings Inc. (NYSE:ARCO) is the largest McDonald’s franchisee in the world, operating exclusively in Latin America and the Caribbean. The company’s name, which translates to “Golden Arches” in English, reflects its core business of running McDonald’s restaurants across 20 countries in these regions. The company offers region-specific menu items, such as flan-like desserts in Peru, dulce de leche treats in Argentina and Uruguay, and McMolletes in Mexico.
A major catalyst for Arcos Dorados Holdings Inc. (NYSE:ARCO) is its ongoing digital transformation. In Q2 2024, digital sales grew by 24% in US dollars compared to the previous year. The company’s focus on digitalization has led to significant growth in digital channel sales, with increases between 25% and 50% in markets like Chile, Colombia, Ecuador, and Uruguay. The renewal of Arcos Dorados’ Master Franchise Agreement (MFA) with McDonald’s for another 20 years starting in 2025 presents a significant growth opportunity. Both companies recognize the substantial growth potential for the McDonald’s brand in Latin America, which could lead to further expansion and market penetration.
In Q2 2024, Arcos Dorados Holdings Inc. (NYSE:ARCO)’s revenue rose 15.2% year-over-year to $1.12 billion, driven by strong same-store sales in Brazil and the Caribbean, along with effective marketing and menu innovations. Profitability improved, with net income up 28.7% to $48.3 million, adjusted EBITDA increasing 22.1% to $112.6 million, and operating margin expanding by 80 basis points to 7.2%, due to enhanced operational efficiency and cost management.
As of Q2 2024, 19 hedge fund holders held stakes in the stock out of which the largest stakeholder was Moerus Capital Management with shares worth $18,683,865 as tracked by the Insider Monkey database. The stock holds a Moderate Buy rating based on 2 Wall Street Analysts. According to analysts, the average 12-month price target for Arcos Dorados Holdings is $13.50, with a high of $14.00 and a low of $13.00, reflecting a 38.75% increase from the current price of $9.73.
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