- Fair value
- $270.00 → $295.00(+9.3%)
- Discount
- 12.9% → 20.3%(+7.4 pts)
- Thesis
- McDonald's trades at a discount because fewer customers visit its US restaurants, and the plan to fix this costs money now. In Q2 2026, US same-store sales grew only 0.8%, from higher prices, while the number of guests fell. Third-party data (Placer.ai) showed US visits down 4.5%, against 3.0% for the industry. Lower-income customers, who are a large part of McDonald's visitors, cut back the most. In August 2026, McDonald's moved its 50,000-restaurant goal from 2027 to 2028. At its Investor Day on September 23, 2026, McDonald'sit promised about $8.5 billion of rent relief and capital support to franchisees through 2036, and moved its 50,000the CFO said that US same-restaurant goal from 2027 to 2028store sales will be slightly negative in Q3 2026. Investors see cash that goes out now for benefits that come over ten years, and the. The stock had its worst day since March 2020April 2025, and it fell about 12% in September 2026. Higher interest rates add a second pressure. The 10-year Treasury yield rose above 5% in September 2026, and this lowers the price investors pay for steady rent and royalties. For the gap to close, US guest counts must stop falling and turn positive in 2027, the new value menu (Extra Value Meals) must bring customers back without cutting franchisee profit, and McDonald's must keep its investment-grade credit rating while it pays the dividend and funds the franchisee plan. The first test is the Q3 2026 report, expected in late October or earlyon about November 4, 2026, and above all the US guest counts and what management says about US traffic in October. If traffic recovers, the discount can close over the next four to six quarters. The main risk is that the consumer stays weak and the $8.5 billion goes to a franchise system that sells less.
- Risks
- Fewer customers visit McDonald's US restaurants. US guest counts fell in Q2 2026. At Investor Day on September 23, and2026, the CFO expectedsaid that US same-store sales towill be slightly negative in Q3 2026. AboutPlacer.ai data shows that about 36% of McDonald's US visitors come from lower-income areas with a median household income below $50,000, and these customers cut back the most. Competitors also push low-price deals. If traffic does not recover, rent and royalties grow slowly.
The $8.5 billion franchisee plan costs money now, and its benefits come over about ten years. Rent relief lowers McDonald's highest-margin income. Analysts estimateBMO estimates that it cuts earnings per share by about 1% in 2027 and 2028, and by 2% to 3% by 2030. Only 60% to 65% of franchisees used the new value prices in Q2 2026, so franchisee support is not certain.
Higher interest rates lower the price investors pay for steady rent and royalties. The 10-year Treasury yield rose above 5% in September 2026, and the stock fell about 1412% in one monthSeptember 2026. The direct cost is small, because about 97% of McDonald's debt has a fixed rate, at an average of about 4.0%.
McDonald's had about $39.9 billion of debt at June 30, 2026, about 2.6 times EBITDA, and its shareholders' equity is negative because of past buybacks. In 2025, dividends and buybacks used about all of its free cash flow. The franchisee plan leaves less cash for buybacks. Its credit ratings are BBB+ at S&P and Baa1 at Moody's.
Sales outside the US are slowing too. Same-store sales grew only 1.5% in International Operated Markets and 1.9% in International Developmental Licensed Markets in Q2 2026. China and the Middle East add political risk, and a strong US dollar lowers the value of foreign sales.
Weight-loss drugs such as GLP-1s can reduce how much people eat out. Higher beef prices and higher minimum wages, such as California's $20 fast-food wage, lower franchisee profit first, and this can slow new restaurant openings. A food-safety problem, such as the E. coli outbreak in October 2024, can also cut traffic for months. A proposed class action filed in October 2026 alleges that McDonald's pricing tool breaks antitrust law. The case is at an early stage.
- Balance sheet
- Cash: $822M
Debt: $39.9B
Net debt: $39.1B
EBITDA, last 12 months: $15.1B
Net debt / EBITDA: 2.6× (medium)
Interest cover: 7.8×
Undrawn credit line: $4.0B, to June 2028
Ratings: S&P BBB+, Moody's Baa1
McDonald's shows negative shareholders' equity: a deficit of $1.0 billion at June 30, 2026. This is not a sign of distress, because the company owns much of the land and buildings that franchisees rent, carries this property at old cost, and gets a steady cash flow from rent and royalties. Over many years, it has used cash flow and debt to buy back $80.5 billion of its own stock (treasury stock at cost). Debt is mostly unsecured notes of the parent. ItCommercial paper and debt due within one year are shown as long-term debt, because the unused credit line supports them. Debt does not include $14.07 billion of lease liabilities ($14.0 billion long-term lease liabilitiesand $0.7 billion current). At December 31, 2025, 97% of the debt had a fixed rate, the average rate was 4.0%, and 39% was in foreign currencies. EBITDA is for the 12 months to June 2026, and interest cover is for the first half of 2026. Liquidity also comes from a $5.0 billion commercial paper program, of which $0.8 billion was used at December 31, 2025. McDonald's filed no new debt and no change to its credit line after the 10-Q. About $3.2 billion of debt matures in 2027 and $5.2 billion in 2028. The ratings are from the 10-K of February 2026. In 2025, dividends of $5.1 billion and buybacks of $2.1 billion used almost all of the $7.2 billion of free cash flow. In September 2026, McDonald's set a plan to give franchisees about $8.5 billion of rent relief and capital support through 2036. This leaves less cash for buybacks, unless debt rises.
As of 2026-06-30.
- Checkpoints
- Nov 4, 2026 (estimate): Q3 2026 results: US guest counts and same-store sales. Pending. Watch: US same-store sales near zero or better, withpositive US sales in September as the CFO expected, and guest counts that stop falling in October, pass; a further fall in US traffic or a cut to the outlook fails.
Feb 2027 (estimate): Full-year 2026 results and 2027 outlook. Pending. Watch: A 2027 outlook with positive US guest counts and free cash flow conversion in the mid-80% range passes; lower guidance or higher debt to fund the franchisee plan fails.
May 2027 (estimate): Q1 2027 results: value menu and franchisee profit. Pending. Watch: Positive US guest counts with stable franchisee cash flow pass; traffic that still falls after the Extra Value Meals push fails.
- Recent events
- 2026-10-08: Bernstein cut its price target to $250 from $295. Bank of America kept its target of $343. In Restaurant Dive, the CFO said that the restaurant upgrades will come in phases, mostly with the normal remodel cycle, and that rent relief and capital support will be different in each market.
2026-10-06: Bloomberg reported that some US franchisees object to the cost of the restaurant upgrades in the new plan, at least $800,000 per restaurant. The doubt also delayed franchisee visits to the prototype restaurant. On the same day, KeyBanc cut its price target to $280 from $305.
2026-10-05: Wells Fargo cut its price target to $270 from $300, and Guggenheim cut its target to $250 from $290.
2026-10-02: A customer filed a proposed class action against McDonald's in a US federal court in Illinois. It alleges that McDonald's AI-enhanced pricing tool shares nonpublic store data with franchisees and helps raise menu prices, against antitrust law. The complaint says that menu prices rose 40% from 2019 to 2024. McDonald's said that the suit is "filled with inaccuracies", that franchisees set menu prices, and that it will defend itself.
2026-09-28: Melius Research kept its Sell rating and cut its price target to $230 from $250. Morgan Stanley cut its target to $297 from $308.
2026-09-24: After Investor Day, several analysts cut their price targets: Morgan Stanley to $297, TD Cowen to $270 from $282, BMO to $310 from $335, and Evercore ISI to $300 from $320. BMO kept $310estimated that the franchisee plan cuts earnings per share by about 1% in 2027 and 2028, and by 2% to 3% by 2030. Evercore lowered its 2027 to 2030 estimates by about 3% because of the rent relief, more refranchising, and slower US sales.
2026-09-23: At its Investor Day, McDonald's promised about $8.5 billion of rent relief and capital support to franchisees through 2036, about $5 billion of it by 2030. It said the plan adds about $100,000 of cash flow a year to an average US restaurant. Its 2030 targets include an operating margin in the low-to-mid 50% range and a franchised share of about 98% by the end of 2028. The CEO said industry traffic will stay flat while inflation stays high. The CFO said that US same-store sales were slightly negative in July and August, will be positive in September, and will be slightly negative for Q3. The stock fell 4.81% that day, its worst day since March 2020April 2025.
2026-09-17: McDonald's raised its quarterly dividend by 43.8% to $1.93 per share, from $1.86. This is its 50th annual increase in a row.
2026-08-04: McDonald's reported Q2 2026 results. Revenue was $7.10 billion, up 4%. Adjusted EPS was $3.38, up 6%. Global same-store sales grew 1.3%, and US same-store sales grew 0.8%, with fewer guests. Management said most of the US shortfall came from weak execution of its value menu. It moved the 50,000-restaurant goal from 2027 to 2028. Skye Anderson replaced Joe Erlinger as president of McDonald's USA.
2026-07-24: Third-party foot-traffic data (Placer.ai) showed McDonald's US visits down 4.5% in Q2 2026 from a year earlier, against 3.0% for the fast-food industry.
2026-05-07: McDonald's reported Q1 2026 results. Revenue was $6.52 billion, up 9%. Adjusted EPS was $2.83. Global same-store sales grew 3.8%, and US same-store sales grew 3.9%, mostly from higher prices.
2026-02-11: McDonald's reported Q4 and full-year 2025 results. Global same-store sales grew 5.7% in Q4, and US same-store sales grew 6.8%. Full-year adjusted EPS was $12.20. For 2026, it planned about 2,600 new restaurants, about 2,100 net of closures.