We buy Lumberjack Sandwiches, and McDonald's shares go up?

McDonald's shares as a cure for stock market collapse? When the main American S&P 500 index fell by more than 16 percent from January peaks, the fast food giant's valuation rose by 5 percent.

McDonald's total revenues since the beginning of the year, despite the fact that in the third quarter we were dealing with a decrease by 5 percent, compared to last year they increased by 9 percent. According to Chris Kempczinski, head of the global company: “The macroeconomic landscape continues to evolve and uncertainty persists. However, we operate from the position of a competitive force.” 

- Increases in the prices of dishes and sandwiches could have had a positive impact on McDonald's revenues. It seems that the company managed to pass the costs on to the recipients quite well, which we could see, among others, in the the price of a cheeseburger in California rose 50% from $0,99 to $1,48. It was the first increase in the price of this sandwich in 14 years – comments Grzegorz Dróżdż, junior financial market analyst at Conotoxia Ltd. (Cinkciarz.pl investment service). 

READ: How to invest in fast food chains? [Guide]

McDonald's share upside potential

Earnings per share fell 6,29 percent. y/y, which the company explained by rising costs in the euro area caused mainly by energy prices. However, we learned from the stock market report that: "Comparable sales in the US increased by over 6 percent. during QXNUMX, which means the ninth consecutive quarter of growth in comparable sales in this segment.

– Currently indicator price to profit (P/E) is 34, which may indicate signs of overvaluation. However, if we take into account analysts' expectations regarding future profits, the P/E ratio is 26,2, which could give the potential for further increases in share prices. The company has also announced another increase in dividend payments – indicates an expert from Conotoxia Ltd.

Will Americans turn their backs on Big Macs in times of crisis?

According to the analysis of the company NUMBEO, which deals with measuring the cost of living in various places around the world, the price of a dinner in cheap restaurants oscillates between USD 10 and USD 30 (average USD 16). The same range for an average McDonald's set, depending on the state, ranges from $7 to $12 (average $8,5), which is twice as expensive as a meal at a popular fast food joint.

The question may arise whether in the age recession Americans will decide to cook at home? However, this seems unlikely due to the fact that, according to Statista data, as many as 82 percent. of its citizens live in cities, where eating out is much more popular. Besides, preparing a meal at home doesn't seem to be cheap enough to compete with fast food.

“We can assume that even if the income of the average American declines, it will be difficult to give up cheap eating out. Alternatively, the ordered portions can be smaller and thus cheaper, but this could be good for everyone. According to the National Health and Nutrition Examination Survey data from 2017-2020, 41,9 percent of American adults are obese – informs the analyst Conotoxia Ltd.