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McDonald’s Remains a Good Bet for Investors Despite Coronavirus Pandemic

Editorial Staff



Mcdonalds fast food | McDonald’s Remains a Good Bet for Investors Despite Coronavirus Pandemic | Featured

Despite the coronavirus pandemic slowing down businesses, McDonald’s remains a good bet for investors.

The spread of COVID-19 prompted McDonald’s and other U.S. businesses to significantly scale back their operations. The changes may have an impact on foot traffic, but “McDonald’s is well-positioned to recover from the financial strain, Baird Equity Research said in a note to investors,” as reported by Fox Business.

“Among the companies in our coverage universe, we consider MCD among the best positioned to manage through the highly uncertain demand backdrop being caused by the coronavirus pandemic,” Baird analysts said in the note. “Specifically, MCD appears to have plenty of liquidity to support its franchisees as they work through short-term sales and cash flow issues, and history suggests the McDonald’s brand contains recession-resistant qualities that should allow for better-than-average fundamental performance in [the second half of 2020 and 2021].”

According to Fox Business, the virus has already had a notable impact on the fast-food giant’s global business. It has shuttered stores in some European markets, including the United Kingdom, France, and Italy, in order to manage the crisis.

McDonald’s also said last month that it would limit its service at company-owned stores in North America to drive-thru, walk-in, and delivery orders.

According to Baird, McDonald’s will have a projected cash balance of nearly $7 billion as of the end of the fiscal first quarter. This provides “a reserve to help franchisees until it can return to normal business. The recent passage of a government stimulus package is expected to provide further relief,” reported Fox Business.

“We believe MCD is well-positioned to perform strongly on a relative basis in this scenario when considering global comps for McDonald’s during 2008-2009 were a recession-resilient +5.4% (best-performing brand in our coverage universe),” Baird said.

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