McDonald’s Corporation (NYSE:MCD) investors were left with a sour taste in their mouths after analysts at RBC Capital slashed their price target for the fast food chain after a “disappointing” start for its new $1-$2-$3 value menu.
As a result of the slow start and “deteriorating industry conditions”, RBC lowered its US same-store sales growth forecast for the first quarter of 2018 to 1% from 3.5%. The average Wall Street estimate is for growth of 3.8%.
“Our sense is that the $1 $2 $3 platform stole attention from local marketing, particularly at breakfast, which likely slowed as a consequence,” said David Palmer in a research note.
“In addition, we believe $1 $2 $3 menu's positioning as a variety play protected franchisee profitability but lacked the 'hero' item necessary to resonate with value-conscious consumers.”
Palmer added he was cautious in the near-term, but can see opportunities for growth in the coming quarters.
The analyst chopped his price target to US$170 from US$190, although he kept his ‘outperform’ rating in place.
Shares in the fast food giant fell 3.9% to US%149.74 in early trading on Friday.