McDonald's stock has its fourth downgrade in a week. Should we sell it?

Analyst firm Argus Research downgraded McDonald's stock to «hold» as it expects further declines in restaurant traffic. Consumers prefer to cook at home because of the perceived price increase, analysts explained in a note cited by Seeking Alpha. This is the fourth downgrade on the restaurant chain's stock in a week.

Analyst John Staszak of Argus Research reduced his rating on McDonald's shares from «buy» to «hold.» At the same time, he did not disclose a new target price. The last time the analyst raised his target on the stock on March 11 to $370, up 22% from its current value.

After several years of price increases and amid fierce competition in the quick-service segment, traffic at McDonald's restaurants is likely to remain weak. This will limit profit growth, Stashak believes.

Since the beginning of the year, McDonald's shares have gained 4.3%, slightly outperforming the Restaurant Sector ETF (+3.4%). However, the analyst believes the company's securities are valued too high, especially when compared to competitors such as Darden Restaurants (Olive Garden and LongHorn Steakhouse) and Restaurant Brands (Burger King). Staszak anticipates that McDonald's stock will continue to rise in line with the market rather than outperform.

An analyst lowered McDonald's fiscal 2025 earnings forecast for McDonald's from $13.2 to $12.3 per share. That's nearly identical to the consensus forecast of $12.27, notes Seeking Alpha.

Nevertheless, the company's long-term prospects remain positive: its broad geographic diversification, share repurchase program and steady dividend growth make McDonald's an attractive investment for the long term, Seeking Alpha notes.

McDonald's received its first «Sell» rating on June 10 - it was given by Redburn Atlantic analysts Chris Luyckx and Edward Lewis. Prior to that, they had recommended buying the stock for two years. Redburn analysts also set the lowest target for McDonald's on Wall Street at $260. That's about 14% below McDonald's stock price at the close of recent trading. The reason for the rating change was the restaurant chain's falling sales. Analysts have warned that the company could face a decline in annual revenue of about 1% as weight-loss drugs (GLP-1 class) such as Ozempic become more common. 

The day before, Morgan Stanley lowered its assessment of McDonald's from «above market» to «at market level». The investment bank explained that it sees problems not with McDonald's, but with the overall market. «McDonald's is a top-quality business, but it has not been and likely will not be immune to the structural challenges facing the fast food market,» the investment bank said in a note cited by CNBC. Among the factors putting pressure on the industry, Morgan Stanley cited uncertainty in economic policy, particularly affecting lower-income consumers, as well as a growing interest in healthy lifestyles and nutrition.

Even earlier, on June 6, Loop Capital moved the securities from «buy» to «hold.» Loop Capital cited negative reviews from McDonald's customers about McCrispy's chicken strips, writes Barron's. According to analysts, despite the «great flavors,» the strips look less appetizing than McDonald's previous chicken nuggets or tenders. This has caused disappointment among some consumers.

Overall, Wall Street's views on the fast food chain diverge: 17 of 37 analysts recommend buying the stock, while 19 take a neutral stance, advising to hold it for now. And one analyst suggests selling McDonald's stock. The consensus target price of $331.3 implies a 9% upside for the stock.