McDonald’s Corporation (NYSE: MCD) shares have weakened from $218 below $207 since the beginning of December, and the current price stands around $208. Shares of McDonald’s could be a good investment option, but now is not the best time to buy this stock because it could weaken in the upcoming weeks.
Fundamental analysis: McDonald’s has a strong cash flow, which allows it to pay and increase dividend paymentsMcDonald’s shares have weakened after the Stephens analyst team pulled the bullish rating and assigned a price target of $225. The main reason for this is the Covid-19 pandemic and the fact that the US stock market could enter the correction phase.
The current risk/reward ratio is not good for long-term investors despite McDonald’s shares remaining in a bull market. McDonald’s reported that Q3 global company sales were down 2.2% from a year ago, which is very good, and the company hiked its quarterly dividend by 3% to $1.29 per share.
In the same period, earnings per share rose by 4% to $2.22, and the delivery sales increased across all of the company’s major markets. McDonald’s has a strong cash flow, which allows it to pay and increase dividend payments regularly.
McDonald’s is expanding its business, and the company added the McRib sandwich back to its menu on a national basis this December. According to analysts, McDonald’s is expected to achieve strong revenue and earnings growth in 2021, but any bad news with the COVID-19 vaccine could change this positive trend.
Technical analysis: Bears are focused on breaking the support level at $200Technically looking, as long the price of this stock is above $200 support, it remains in the bull market, but there are some obvious risks when it comes to buying McDonald’s shares this December. A study published in Nature showed that the biggest causes of Coronavirus transmission are indoor spaces like restaurants.
There has been some positive data regarding a COVID-19 vaccine, but no one still doesn’t know what will happen with the virus in the upcoming period.
Data source: tradingview.comThe current support levels are $200 and $180; $ 220 and $230 represent the resistance levels. If the price jumps above $220 resistance, the next target could be located at $230, but if the price falls below $200, it would be a firm “sell” signal and maybe a sign of the trend reversal.
SummaryMcDonald’s is expected to achieve strong revenue and earnings growth in 2021, but the Stephens analyst team pulled the stock’s bullish rating. The current risk/reward ratio is not good for long-term investors despite McDonald’s shares still remaining in a bull market. If the price jumps above $220 resistance, the next target could be located at $230, but if the price falls below $200, it would be a firm “sell” signal and maybe a sign of the trend reversal.
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