McDonald’s will jump 12% as it benefits from consumers who are ‘tired of their own cooking,’ BofA says

• Bank of America raised its McDonald’s price target to $250 per share from $225 per share, citing consumers who are «tired of their own cooking» and flocking to fast food drive-thrus. 
• In a note on Monday a team of BofA analysts also raised their McDonald’s earnings estimates for next year.
• The analysts added that the fast food giant’s partnership with Travis Scott demonstrated its ability to launch well thought-out, minimally complex strategies.

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Bank of America reiterated its «buy» rating for McDonald’s and raised its price objective to $250 per share from $225 on Monday. BofA also raised its 2021E earnings-per-share estimate for McDonald’s up to $8.30 from $8.20 on «better sales expectations.» 

«The quick service segment as a whole has seen greater demand during COVID-19 than pre-pandemic as consumers [grew] tired of their own cooking and leaned into drive-thru and off-premise for engagement with restaurants,» a team of BofA analysts said on Monday. 

The analysts pointed out that the fast food giant’s sales underperformed some of its domestic peers’ because of pressure in its international franchises — many restaurants overseas lack drive-thrus, and foot-traffic during the pandemic was low. However, they added: «A sharp recovery for MCD int’l in July encouraged us that the company can largely offset challenges in certain int’l markets with solid current U.S. performance.» 

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Bank of America also noted that the restauarnt’s recent partnership with rapper Travis Scott demonstrated that its strategies are «well thought out to build-long term traction with minimal complexity.» The Travis Scott Meal attracted younger consumers and used an existing product, the Quarter Pounder, in the partnership.

On Monday McDonald’s announced a partnership with Latin pop superstar J Balvin. The «J Balvin Meal» will feature a Big Mac sandwich, fries, and an Oreo McFlurry. According to a press release, this is the second time a celebrity’s name has been on the McDonald’s menu since 1992. 

McDonald’s traded at $225.07 per share on Monday and gained as much as 1.6% during intraday trading. The fast food giant is up 50% from the depths of the coronavirus crash in March and is up almost 14% year-to-date.