Wells Fargo says McDonald’s $5 meal deal could turnaround the struggling stock. The deal – which includes a McChicken or McDouble sandwich, four chicken nuggets, small fries and a small drink – was introduced on June 25. The offer is valid for one month but may be extended, CNBC previously reported. The $5 deal represents a discount of about 40% from main menu prices, Wells Fargo said. The offer comes after McDonald’s shares have fallen about 15% year-to-date as higher prices and lower sales in the Middle East led to weaker sales at stores in the first quarter. “Looking back,” Wells Fargo believes the $5 meal deal could boost stock performance. The bank examined four previous McDonald’s launches in the U.S.: the Original Dollar Menu in November 2002, the Breakfast Dollar Menu in January 2010, the $2-$3 Menu in January 2019 and the 2 for $5 Mix & Match offer in December 2018. According to analyst Zachary Fadem, McDonald’s managed to outperform the S&P 500 by about 75% in the four years after the launch of its Dollar Menu, which came during a severe consumer recession. The Breakfast Dollar Menu also sent the stock up slightly, according to Fadem. “Historically, MCD wins when the industry shifts to value,” Fadem wrote in a note published Monday. McDonald’s competitors suffered a setback after the company introduced the Dollar Menu — and regained some market share after McDonald’s removed the Dollar Menu, he added. “Comparatives from peers have historically declined during previous periods of MCD’s national gains,” Fadem said. Fadem forecasts the $5 menu could provide a 50-100 basis point tailwind to McDonald’s U.S. comparable same-store sales. “We see reason for a change in sentiment,” Fadem said. In addition to the $5 menu, the analyst believes fading headwinds from the Middle East conflict and the upcoming Olympics should drive the stock in the second half of the year. Wells Fargo has an overweight rating and a $300 price target on the stock, implying about 18% upside from Friday’s close. — CNBC’s Michael Bloom contributed to this report.
