We recently published a list of Jim Cramer is Talking About These 10 Stocks as Markets Rebound. Since McDonald’s Corp (NYSE:MCD) ranks 6th on the list, it deserves a deeper look.
Jim Cramer in his latest program on CNBC talked about the latest rebound in the markets followed by a major selloff on Monday, saying we can “fret” about the interest rates, jobs market or mortgage rates, or we can just buy the stocks of “tremendous” companies and hold on to them.
“Stock prices have become so dependent on the macro, the carry trade, the Fed chatter, that it’s impossible to give you a pat answer even as I’ve told you over and over again that corporate America is doing much better than anyone would expect at this point in the cycle,” Cramer said.
Cramer lamented yet again that people believe a 25bps decline in interest rates could somehow “motivate” people to increase spending and on these hopes they often buy “phony” ETFs.
Cramer also said that the Fed won’t begin to cut rates until it sees consumers “rebelling” against higher prices forcing companies to roll back price increases to pre-COVID levels. Jim Cramer believes we now have an “empowered consumer” who is willing to make choices and choose options that are cheaper and better.” He said that during the pandemic, amid higher liquidity, people were willing to accept higher prices, but not anymore.
For this article we watched several latest programs of Jim Cramer and picked 10 stocks he’s talking about. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
McDonald’s Corp (NYSE:MCD)
Number of Hedge Fund Investors: 63
Jim Cramer in a latest program praised McDonald’s efforts to launch affordable meals to woo customers.
“Kudos to McDonald’s for recognizing they have to come up with a cheap alternative that people can afford, I wish other companies would follow suit.”
Cramer shared some excerpts from the latest earnings call from MCD. Here is one of those:
We’ve seen a lot of enthusiasm and the number of $5 meal deals sold are above expectations. Trial rates of the deal are highest amongst lower-income consumers and sentiment towards the brand around value and affordability has begun to shift positively. To date, 93% of our restaurants in the US have committed to extending the offer even further into the summer. And there are other ways customers can experience great value at McDonald’s. We continue to provide a steady stream of offers on the mobile app, including nationwide free Free Fries Fridays, where you can get a free medium fry every Friday with any $1 purchase on the app. And as we work through the important details of the future US value platform, we will continue to make decisions grounded in insights with the customer at the center.
At the end of the day, we expect customers will continue to feel the pinch of the economy and a higher cost of living for at least the next several quarters in this very competitive landscape.
Read the complete transcript of MCD’s latest earnings call here.
McDonald’s Corp (NYSE:MCD) recently missed second-quarter estimates for both earnings and revenue as consumers worldwide push back on rising prices. In response, the company has launched a $5 value meal to woo customers. McDonald’s Corp (NYSE:MCD) said this deal is gaining traction.
McDonald’s Corp (NYSE:MCD) bulls believe with inflation beginning to decline and interest rates on the horizon, MCD could be a good buy on the dip for long-term investors. Despite the inflation-related headwinds the company still aims to continue on its path to open 10,000 new stores by 2027. Despite the massive headwinds this year it still plans to open 1,600 net new restaurants in 2024, contributing nearly 2% to systemwide sales growth in constant currencies. McDonald’s Corp (NYSE:MCD) projects its 2024 operating margin to be in the mid-to-high 40% range, underscoring confidence in its expansion pace.
Following the latest dip after earnings, the stock is trading at around 22 times the 2025 earning estimate set by Wall Street. McDonald’s Corp (NYSE:MCD) revenue is expected to increase by 7.90% next year. With over 40 years of consistent dividend increases and growth plans, MCD is a decent buy for investors looking for stable (albeit slow) growth stocks.
Overall McDonald’s Corp (NYSE:MCD) ranks 6th on Insider Monkey’s list titled Jim Cramer is Talking About These 10 Stocks as Markets Rebound. While we acknowledge the potential of McDonald’s Corp (NYSE:MCD), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MCD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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