Excitement over Snack Wrap's return to McDonald's. Why analysts are raising their forecasts

Wall Street analystsnoted that the return of the popular Snack Wrap roll to McDonald's  menu is already having a positive impact on the company's sales. The chicken dish, similar to the twister from KFC, was removed from the lineup in 2016, but the company brought it back on July 10 to appeal to low-income customers amid declining sales. Analysts expect the hype around the roll to help bolster revenue growth in the third quarter and support quotes, which have lagged the market since the start of the year.

- Wells Fargo analyst Zachary Fadem on July 17 reiterated an Overweight rating for McDonald's securities, equivalent to a buy advice on them, and maintained a $350 target price -- it's nearly 17% above the last close. Fadem called the stock a top pick ahead of its second-quarter report on Aug. 6. 

"Since April, [McDonald's] shares have lagged the S&P 500 by 19pc, but we expect comparable sales in the second quarter to accelerate about 5pc from the first quarter and come in plus. [The report] will likely be accompanied by upbeat comments about the current quarter due to Snack Wrap sales," noted a Wells Fargo analyst in a note cited by CNBC. He predicts the pace of new product introductions will accelerate going forward, and international markets and currency factors should support EPS growth.

  - Truist Securities on Thursday raised its target on McDonald's securities to $356, maintaining a "buy" recommendation, reports Investing.com. The investment bank analyst noted strong sales growth in the week following the return of chicken rolls and now forecasts the company's comparable sales to grow 3% in the third quarter.  

- AnalystGoldman Sachs analyst Christine Cho last week upgraded her rating on McDonald's shares from "neutral" to "buy" and left her target price at $345, up 15% from the current price. She said the introduction of rolls Snack Wrap to the menu will strengthen McDonald's position in the market. Cho said that although increased price competition in the sector may put pressure on sales growth rates and margins in the short term, McDonald's will still be able to outpace competitors in the long term thanks to the new products. She emphasized that the company manages to increase sales even against the background of slowdown or decline in revenue of other players.

- Evercore ISI analyst David Palmer also notes that the third quarter is off to a strong start for McDonald's thanks to the return of Snack Wrap. He estimates that the restaurant chain's comparable sales in the U.S. are now showing growth of about 7%, but he expects the final quarterly figure to be closer to 3% due to a possible slowdown in August. Palmer added that McDonald's has found a successful formula for success: customers have long asked for the return of the chicken roll, it is attractively priced at $2.99 a piece, and is in line with the trend for protein snacks.

- In Wolfe Research wrote that customer interest in Snack Wrap is confirmed in practice: social networks complain that in some restaurants it is quickly bought up, and traffic has increased noticeably. "In our opinion, the excitement around Snack Wrap has increased attention to the brand and set McDonald's a good start at the beginning of the third quarter," pointed out Wolfe analyst Greg Badishkanian.

- The Barclays agrees that the return of the inexpensive snack should help drive traffic to the chain's establishments. Investment bank analyst Jeffrey Bernstein called McDonald's its top stock among quick-service restaurants.

Investors aren't as enthusiastic about McDonald's s stock - since the day the company announced the return of the Snack Wrap, its securities are down 4%, but have risen slightly since the roll appeared on the menu on July 10. 

At the end of trading on July 17, quotations of McDonald's added 0.5%, reaching $300.4. Since the beginning of this year, the market value of the company has grown by 3.6%. By comparison, the main U.S. stock index S&P 500 has risen more than 7% over the same period. 

The consensusWall Street target price of $328.6 implies a nearly 10% increase in the company's stock price from the last close. At the same time, the majority of analysts, who assigned ratings to McDonald's securities, take a neutral stance with a Hold recommendation: 19 out of 38 advise to buy. Another 17 advise to buy (Buy and Overweight), and the remaining two - to sell.

This article was AI-translated and verified by a human editor