McDonald’s Invests in Tech, Adjusts Late Night Menu

McDonald’s (Ticker Symbol: MCD) is announcing that they are dropping some of the items from their late night menu. On April 30th, the fast-food giant is coming out with a “new” late night menu.  The menu will not have any new items but it will remove some items that were available from midnight until 5 a.m. Due to lackluster late night sales, McDonald’s will be cutting out chicken sandwiches, crispy tenders, filet-o-fish, snack wraps, and its premium salads from its late-night menus.  Fan favorites like the Big Mac, Chicken McNuggets, and all day breakfast items will still be available.

Additionally, McDonald’s recently announced on March 25th that it was going to acquire a personalized data startup company called Dynamic Yield in a deal that is valued over $300 million.  This is their largest acquisition in more than 20 years and it’s McDonald’s first major investment in a technology company. Just a week later, McDonald’s announced another tech investment in mobile app vendor Plexure which is used in 48 countries outside of the U.S.

With a market value of over $140 billion dollars, the technology investments are relatively small for the fast food giant.  The investments are important for McDonald’s though because it would enable them to use that technology to bring back customers that they have lost to other fast food chains and try to get ahead of their competition.  McDonald’s has lost sales due to its order in accuracy and speed of service, both of which were statistically behind its competitors.

McDonald’s stock was stuck in a 4-year long Horizontal Channel from 2012 to 2016 between the prices of $105.00 and $85.00.  The stock finally broke out from that congestion on a good earnings and revenue report, while also issuing positive guidance.  After finding some minor support at the 100-Week Moving Average, the stock went on a tear, rallying over 75% over the course of the next three years. McDonald’s stock ticked to an all-time high today of $191.20.

(Chart above courtesy of ​www.tipranks.com​)  

Based on a survey of 13 analysts offering 12-month price targets, the average price target for McDonald’s stock is $198.90.  According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $190.33.

Last quarter, McDonald’s raised its menu prices by roughly two percent in an attempt to counteract the cost of rising wages, higher food costs, and investments in technology.  By slimming down the menu, McDonald’s will have the opportunity to cut costs through simplification of the menu, speeding up its service and decreasing losses on food waste. McDonald’s future looks bright given new investments in technology and menu adjustments.  Investors should look forward to McDonald’s next earnings conference call on May 2nd for future updates and news.

 


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