It’s time to move to the sidelines on shares of McDonald’s as the company grapples with an E. coli outbreak tied to some of its U.S. restaurants, Baird said. Analyst David Tarantino downgraded shares to neutral from outperform, saying that the food safety issue linked to its Quarter Pounder burgers could weigh on short-term sentiment and impact comparable store sales. The stock shed 6% before the bell. “While we are confident MCD ultimately can effectively manage through the E. coli issue successfully, the elevated risk related to the near-term demand outlook for the U.S. gives us some pause at the same time we are seeing signs of an increasingly challenging economic backdrop outside the U.S.,” Tarantino wrote. The analyst did reiterate his positive long-term outlook on the stock given the strong fundamentals and business model. However, uncertainty over how soon the company can resolve this issue — and the extent of media attention — creates visibility issues in the short run. Along with the downgrade, Tarantino cut his price target to $290 from $320 a share and lowered his earnings estimates for the fourth quarter and 2025. The new price target implies about 8% downside from Tuesday’s close. Shares are up 6% in 2024. MCD YTD mountain Shares in 2024. Other Wall Street firm’s also anticipate a strained near-term setup. Barclays analyst Jeffrey Bernstein retained his overweight rating but noted that shares may underperform over the short run. “Given McDonald’s ubiquitous presence across many markets around the world, traditional & social media will likely report on these outbreaks,” he wrote. “In terms of the stock impact, time is of the essence for McDonald’s to limit & contain the outbreaks in a swift & decisive manner.” He views next week’s earnings print as an opportunity for management to alleviate investors, but expressed concerns of a wider withdrawal across the quick service industry in the near-term given McDonald’s prominence. Rivals such a Burger King and Wendy’s could benefit from displeased customers.
