We initiate on MCD with a Hold rating and a $329 PT. MCD is a unique global leader in QSR, with 40,000 units and a menu spanning from Chicago to Shanghai. The business resembles a staple, in our view, with a mid-cycle value proposition currently under pressure. Management is balancing franchise growth and value promotions effectively, and our base case assumes high-single-digit U.S. guest count recovery until 2H25; 7.1% EPS growth in FY26E constrained by ongoing value-mix dilution and incremental margin levers (menu innovation, digital). The $5 meal deal appears sticky among low/mid-income demographics but pressures check size and margins, driving mix/value trade-offs. 20bps/year margin expansion is guided, with an FX tailwind fading by 2025. Our 25.5x P/E Target Multiple underpins the $329 PT, in line with a 27.6x P/E peer median and reflecting a cautious investment outlook amid recent insider selling. The fundamentals balance structural net unit expansion and value promotions against mix/value dilution and EU commodity headwinds. A sharper consumer reset could push the equity above fair value, though near-term R/R now hinges on the cadence of U.S. traffic recovery. At these levels, downside risks from buybacks and branding are likely well appreciated; upside will require positive volume inflection points.
Supply Chain Severs Trust.
We view MCD’s digital capability and loyalty ecosystem as core to competitive differentiation and frequency propping vs. value-mix and quick-service restaurant (QSR) traffic. Our conviction is supported by both the scale of MyMcDonald’s Rewards (growing to 57mn+ 90-day active users globally) and proof of digital revenue contribution now above 40% systemwide in several core markets. These