Two Wall Street analysts have given up on the idea of buying McDonald's. What's bothering them?

McDonald's is likely to soon feel the same pressure that the entire fast food sector is already experiencing, according to a Morgan Stanley analyst. He no longer recommends investors to buy McDonald's shares and lowered his price target by 1.5%. Morgan Stanley became the second investment bank to downgrade McDonald's since the end of last week. The reason for the previous review was the unpresentable appearance of chicken strips.  

June 9, Morgan Stanley analyst Brian Harbour downgraded the recommendation on shares of McDonald's restaurant chain from «above market» (Overweight, equivalent to a «buy» recommendation) to «at market level» (Equal weight), and also lowered the target price from $329 to $324 per share. The new outlook still suggests the stock is up about 5% from the closing level of recent trading. McDonald's shares were down 1% to $304.1 on Monday.

The analyst explained that he sees problems not with the restaurant chain, but with the entire market as a whole. «McDonald's is a top-quality business, but it has not been and likely will not be immune to the structural problems facing the fast food market,» explained Harbour in a note cited by CNBC. 

Among the factors putting pressure on the industry, the analyst cited uncertainty in economic policy, especially affecting low-income consumers, as well as growing interest in healthy lifestyles and nutrition. Among the trends Barron's highlights is the growing popularity of GLP-1 weight-loss drugs, which also «does not bode well for fast-food restaurants.»

So far, McDonald's shares have performed better than rival securities, but their growth may slow down, warns an analyst at Morgan Stanley. «The stock has added 6% since the beginning of the year, with investors seeing it as a defensive asset. The stock was just 5% below all-time highs, despite fundamental problems in the industry that have been present for over a year. At the current juncture, we see a more balanced balance between risk and potential return: on the one hand, McDonald's maintains its leadership position in the fast-food segment, while on the other, it is increasingly hampered by structural shifts in consumer behavior,» Harbour wrote.

The analyst notes that the current valuation of the restaurant chain's stock «looks fair in a historical context,» but warns that if «things don't go according to plan,» the bank could lower the valuation.

Morgan Stanley's Harbor became the second Wall Street analyst to downgrade McDonald's stock in recent days. On June 6, Elton Stump of Loop Capital downgraded it from «buy» to «hold» and lowered the target price from $346 to $315. The new benchmark implies a potential upside of 2.6% for McDonald's stock. Stump cites negative feedback from McDonald's customers about McCrispy's chicken strips, writes Barron's. According to the analyst, despite «great flavors,» the strips look less appetizing: they have less breading and are shallower than McDonald's previous chicken nuggets or tenders. This caused disappointment among some consumers and questioned the effectiveness of the product line in its current form.

But overall, Wall Street remains optimistic about McDonald's, notes CNBC. According to LSEG, of the 38 analysts tracking the company's stock, 22 of them advise buying it (Buy and Overweight) and all the rest advise holding it.

McDonald's starting July 10 will again offer in the U.S. the Snack Wrap, a chicken cutlet roll with lettuce, grated cheese and sauce in a wheat tortilla. This dish, while popular with diners, disappeared from the menu in 2016 due to the difficulty in preparation. By bringing it back to the menu, the fast-food giant aims to reverse a trend of declining revenue caused by reduced spending by low-income consumers and a downturn in traffic at the chain's restaurants after last year's E. coli outbreak. McDonald's comparable U.S. sales dropped 3.6 percent in the first quarter, the second consecutive quarterly decline after a 1.4 percent drop in the fourth quarter of last year.