Three Top Restaurant Plays for 2021

National and international fast food chains have entered 2021 in a commanding position to recoup the balance of losses posted in 2020. More importantly, they’re likely to grow market share well above prior highs because tens of thousands of smaller operators have been forced out of business as a result of lockdowns and social distancing. It could take years for a new wave of restaurateurs to obtain financing, given the credit damage caused by bankruptcy filings.

Three top restaurant plays for 2021 offer few unexpected opportunities because they’re all household names that have survived and prospered during the pandemic. These big cap players have also established new delivery channels and expanded drive-through facilities in the last year, putting them in perfect positions to pick up the slack left by the departure of your favorite rib joints and greasy spoons.

McDonald’s

Dow component McDonald’s Corp. (MCD) entered a steep correction in the fourth quarter of 2019 and fell to a three-year low in March 2020. The stock completed a round trip into the prior high and broke out in October but the rally failed, yielding mixed action into January. Price action settled on the 200-day moving average in December and has held that level, raising odds it will soon enter a breakout run, possibly fueled by declining infection rates in the United States.

Chipotle Mexican Grill

 Chipotle Mexican Grill (CMG) isn’t well-known in parts of the world but it’s now the second highest-capitalized restaurant chain, behind Mickey D. The burrito purveyor has posted better-than-expected numbers throughout the pandemic and now offers delivery, after resisting that revenue source for years. The stock broke out to an all-time high in December, after a three-month consolidation, and could post outstanding returns for investors in 2021.

Yum China

 Yum China Holdings Inc. (YUMC), Shanghai-based purveyor of KFC, Taco Bell, and Pizza Hut, was spun off from Yum! Brands Inc. (YUM) in November 2016. It’s now a $22 billion operation that’s outperforming the parent, breaking out to a new high in June when China emerged from the COVID-19 pandemic. The stock has continued to post new highs since that time, culminating in Jan. 11’s all-time high at 61.18.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Top Blue Chip Picks for 2021

2020 has shaped up as an excellent year but it’s time to move on and think about 2021. Market leaders in one year often underperform in the following year as investors close out top performers and seek lower risk opportunities. These plays often come with stocks that have posted meager returns but are well-positioned for breakouts and sustained uptrends. Let’s look at three blue chip stocks that meet these criteria in an attempt to get a leg up on the competition.

COVID-19 recovery plays are sitting at the top of this list for obvious reasons but lesser known opportunities are developing as well. The broad market also ignored defensive and household plays through most of the year, instead chasing the hottest momentum stocks, initial public offerings, and special purpose acquisition companies (SPACs). These laggards could shine in 2021 because perennially strong performers rarely have two ‘off years’ in a row.

Visa

Dow component Visa Inc. (V) has benefited from the accelerated shift into digital payments triggered by the pandemic and is viewed as a major beneficiary. However, the company depends on payment volume to book profits, exposing price action to broad economic forces. It’s gained about 12% year-to date but has been stuck at the February high for more than three months. Fortunately, price action is now grinding through the last stages of a breakout pattern.

Pepsico

Pepsico Inc. (PEP) rose 23% in 2019 but has struggled in 2020, posting a mediocre 7% return despite an impressive 2.78% annual dividend yield. That’s still a big deal for non-U.S. traders because contracts for difference (CFDs) pay out dividends, just like shares. The stock rallied back to the February 2020 high above 147 in November and has now completed the last stage of a cup and handle pattern that will generate a measured move target in the 190s after a breakout.

McDonald’s

Dow component McDonald’s Corp. (MCD) topped out in August 2019, well before the pandemic hit world headlines. It failed a breakout above 2019 resistance in October 2020 and turned sharply lower, slumping to a three-month low. The stock has posted a meager 8% year-to-date return but that should improve in 2021, with the pandemic running its course and a bullish 18-month pattern that could complete a breakout in the first quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

McDonalds Bullish Reversal at 50% Fib of Wave 4

McDonalds (MCD) stocks has made a bullish reverse at the 50% Fibonacci retracement level. Does this indicate the end of the retracement and restart of the uptrend? The next earnings date is on 4 February 2021.

Price Charts and Technical Analysis

McDonalds stock 18.12.2020 daily chart

MCD seems to have completed a wave 4 (pink) pattern. This remains valid as long as price stays above the top of wave 1 (blue box). A break below it invalidates (red circle) our wave outlook.

A bullish breakout, on the other hand, confirms our bullish view. A wave 5 pattern could emerge above the resistance zone.

The main targets for upside are the -27.2% Fib at $246 and -61.8% Fib target at $264.

On the 1 hour chart, we see a first hint of a bullish reversal: the price action completed a 5 wave (orange) pattern. This seems to complete a wave 1 (grey).

  • A bearish breakout could indicate a deeper retracement towards the Fibonacci retracement levels. They are expected to create a bounce or reversal.
  • Only a break below the bottom and 100% Fibonacci level indicates an invalidation (red circle).
  • A bullish breakout could indicate a new uptrend again.
  • After the break, price action should make a bull flag to avoid any false breakouts

McDonald's stock 18.12.2020 1 hour chart

For a look at all of today’s economic events, check out our economic calendar.

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

 

Yum! Brands Hits 52-Week High After Upgrade

Yum! Brands Inc. (YUM) is trading at a 52-week high in the first hour of Thursday’s U.S. session after Wells Fargo upgraded the stock. The holding company for Pizza Hut, Taco Bell, and KFC has suffered through a wild 2020, dumping to a four-year low in March and recouping 100% of those losses into November. However, it hasn’t recovered as quickly as rival McDonald’s Corp (MCD) and is still trading below September 2019’s all-time high near 120.

Pizza Hut Growth Stalls

Buying interest has also lagged Mickey D., with Pizza Hut’s U.S. growth stalling a few years ago due to massive competition for the popular fast food. The pandemic has stoked strong 2020 sales due to the explosion of delivery services but most analysts believe it won’t be sustainable. Meanwhile, Taco Bell and KFC are firing on all cylinders, posting sustained multiyear growth that defies the advice of nutritionists, professors, and other folks who care about our health.

Wells Fargo analyst Jon Tower upgraded Yum! to ‘Overweight’ on Thursday, noting “Coming out of a year unlike any other in modern history for the restaurant industry, we expect chains to benefit from pent-up demand and a consumer who is flush with cash to spend. We think this dynamic sets up particularly well for the casual dining space, with this sub-segment likely to see outsized benefits from independent closures, better in-store operating models, more efficient marketing spend, and a viable newer long-term sales channel”.

Wall Street and Technical Outlook

Wall Street consensus is mixed after a turbulent year, with a ‘Moderate Buy’ rating based upon 5 ‘Buy’, 6 ‘Hold’, and 0 ‘Sell’ recommendations.  Price targets currently range from a low of $97 to a Street-high $125 while the stock has opened Wednesday’s U.S. session just above the median $108 target. Additional upgrades or positive commentary between now and the Feb. 4 earnings report could power a rally into the Street-high.

Yum! Brands has nearly filled the October 2019 gap between 103 and 110. The first sustained uptick above that hole will be highly bullish, raising odds the stock will cover the distance up to August 2019’s all-time high at 119.72. However, accumulation readings are stuck at lower levels and a breakout will set off a bearish divergence, raising odds for a failure. The most bullish scenario, given this configuration, will be rangebound action that gives new investors time to jump on board.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

McDonald’s Shareholders Hitting The Exits

Dow component McDonald’s Corp. (MCD) posted an all-time high at 231.91 in October and rolled over, slicing through support at the 50-day moving average. Three attempts to remount that barrier have now failed, raising odds for a secondary selling wave that drops the fast food giant another 10% to 20%. Volume readings are supporting this bearish call, with funds departing at a steady pace, dropping accumulation indicators to the lowest lows since September.

Third Quarter Sales Contraction

The stock sold off after Q3 2020 earnings on Nov. 9, despite beating top and bottom-line estimates by healthy margins. The company also declared a $1.29 per-share annual dividend during the release but that didn’t stop an aggressive decline that began with a 5% rally gap. In retrospect, it’s easy to see why shareholders hit the exits because Mickey D. reported a 1.5% year-over-year revenue decline and 2.2% drop in global comparable sales.

Overhead supply from the ‘bull trap’ continues to weigh on price action, inducing market players to sell modest recovery attempts. The second pandemic wave is adding to downside pressure, compounded by new lockdowns and shutdowns. McDonald’s has adjusted to the restrictions through drive-through and delivery options but the virus will continue to weigh on revenue, especially in parts of the world where restrictions are more severe than in the United States.

Wall Street And Technical Outlook

Wall Street has been slow to react to growing headwinds, posting a ‘Strong Buy’ rating based upon 21 ‘Buy’, 6 ‘Hold’, and no ‘Sell’ recommendations. Price targets currently range from a low of $209 to a Street-high $265 while the stock closed Friday’s U.S. session just $1 above the low target. This humble placement usually supports higher prices but the reverse may be true in this case, with analysts asleep at the wheel due to end-of-year strength in other market segments.

McDonald’s failure at the 50-day moving average exposes a trip into the 200-day moving average near 200. That isn’t so bad but the stock has also failed a breakout above the 2019 high at 222, setting off long-term sell signals that favor a breakdown at the round number and downside into the November 2019 low at 187, which also marks a key Fibonacci retracement. Fortunately for bulls, a bounce from that level could complete a major breakout pattern in 2021.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Few US Stocks That Could Brighten Up Your Portfolio

Markets are really quiet recently and that is why we will shift our focus towards the American Stocks, coming in right on time as Axiory have increased their product offering by introducing CFD stocks on MT4. This can significantly help you diversify your portfolio and take advantage of more trading opportunities.

Apple is testing the upper line of the symmetric triangle.

Home Depot locked in the sideways trend, waiting for a breakout.

McDonald’s defending the neckline of the H&S formation.

Netflix aiming for the lower line of the rectangle.

Pfizer with a false bullish breakout.

Prudential enjoying the buy signal after the breakout of the upper line of the triangle.

Tesla testing the lower line of the triangle.

Western Digital with a fresh buy signal coming from the breakout of a major resistance.

Micron Technology enjoying a proper buy signal after making new long-term highs.

For a look at all of today’s economic events, check out our economic calendar.

Investors Lose Appetite for Beyond Meats After COVID-19 Eats Profits

Beyond Meat, Inc. (BYND) shares added to Monday’s losses in extended-hour trading, plunging 22.44% after the plant-based meats company reported quarterly results that fell short of the mark as the pandemic crippled restaurant sales and consumers stockpiled less meat alternative products.

The company reported a Q3 loss of 28 cents a share, with the figure falling well short of analysts’ forecasts of a 5 cent per-share profit. Moreover, the bottom line declined from 6 cents a share in the year-ago quarter. Revenues of $94.4 million also came in below expectations but grew 2.7% on a year-over-year (YoY) basis. The substitute meat producer’s U.S. foodservice segment, which includes restaurants and corporate catering, weighed heavily on the top line, falling 11% as consumers opted to eat at home during the health crisis. However, sales growth of 40.5% in Beyond Meat’s grocery unit helped offset the decline.

“We experienced the full brunt and unpredictability of Covid-19 on our net revenues,” CEO Ethan Brown said in a statement accompanying the earnings call. “Unlike the second quarter, where record retail buying and freezer loading by consumers offset the deterioration of our food service business…the long tail of retail stockpiling by consumers, coupled with continued challenges across the majority of our food service customers, led to [third-quarter] results that were lower than we expected,” he added, per Barron’s.

Through Monday’s close, Beyond Meat stock has a market capitalization of $9.4 billion and trades up a whopping 107.49% on the year. Over the past three months alone, the shares have gained nearly 20%.

Wall Street View

In recent months, the company has copped a barrage of broker downgrades. Analysts have grown increasingly worried about rival players in the sizzling alternative meat space. Look for souring sentiment across the Street to continue after the disappointing Q3 earnings. Also, news that McDonald’s Corp (MCD) has launched a test of its own plant-based burger – the McPlant, could trigger additional re-ratings.

The stock currently receives 3 ‘Buy’ ratings, 1 ‘Overweight’ rating, 10 ‘Hold’ ratings, 2 ‘Underweight’ ratings, and 6 ‘Sell’ ratings. Price targets fluctuate from as high as $178 to as low as $55, with the median target pegged at $136. This represents a 16.5% premium to Monday’s extended hours closing quote at $116.73.

Technical Outlook and Trading Tactics

Since reaching a 52-week high in early October, the share price has retraced back below the 50-day SMA. On Tuesday’s expected weakness, active traders should pay close attention to the $121 level. This is where the stock finds a confluence of support from a multiyear horizontal trendline and the 200-day SMA. A price reversal in this area could trigger a return of bullish sentiment, leading to a retest of last month’s high at $197.50 or even a test of the all-time high (ATH) at $239.71.

McDonalds Could Beat Q3 Earnings Expectations

Dow component McDonalds Corp. (MCD) reports Q3 2020 earnings in Monday’s pre-market, with analysts looking for a profit of $1.90 per-share on $5.36 billion in revenue. If met, earnings-per-share (EPS) would mark an 11% profit decline compared to the same quarter in 2019. The stock sold off 2.5% after posting a Q2 revenue decline of nearly 30% in July but comparative sales surged 4.6% in the third quarter, lifting the fast food icon to an all-time high.

Strong Third Quarter Sales

The stock missed top line estimates in the first and second quarters as a result of pandemic shutdowns but benefited from the summer’s return to normalcy and could easily exceed modest expectations.  However, the dreaded second wave is now underway, with the potential to force millions of folks back into their homes. Even so, the enormous popularity of drive-through, pick-up, and delivery services should keep a floor under profits and revenue until COVID runs its course.

Telsey Advisory Group analyst Bob Derrington raised McDonalds target to $250 last week, noting “same store sales trends accelerated in September to a double-digit increase, yielding its strongest U.S. monthly comps since Sept. 2004, and which carried into early October. While those especially strong September trends were not expected to last, it clearly demonstrated that when its operations, marketing, and product innovation plans are well-aligned, Mickey D is an extremely formidable industry competitor.”

Wall Street And Technical Outlook

Wall Street consensus is highly bullish, with a ‘Strong Buy’ rating based upon 20 ‘Buy’ and 4 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $203 to a Street-high $265 while the stock closed Friday’s U.S. session about $17 below the median $236 target. This placement should yield higher prices if the chain can overcome investor fears about the second wave.

McDonalds topped out at 222 in August 2019 and sold off more than 40% into March’s 3-year low. The subsequent uptick completed a round trip into the prior high in September, yielding a breakout that failed at the end of October. The stock has been trading below the 50-day EMA for the last two weeks, signaling growing fears about the second wave.  This weak sentiment could keep a lid on gains unless the company issues unexpectedly strong Q4 guidance.

For a look at all of today’s economic events, check out our economic calendar.

McDonald’s Probes New High After Twin Upgrades

Dow component McDonald’s Corp. (MCD) is testing September’s all-time high above 225 on Monday after two Wall Street upgrades stoked investor buying interest. Restaurant analysts at Wells Fargo and Bank of America have issued highly bullish commentary in the last few days, pointing out impressive drive-through and off-premises sales as well as improving prospects for a “multiyear run of compounding same store sales and growing profits.”

Restaurant Industry Headwinds

Even so, the fast food king needs to overcome industry headwinds that have kept the majority of restaurant stocks from hitting new highs in 2020. For starters, international sales have lagged as a result of fewer drive-through facilities and a crazy quilt of shutdown rules that have impeded indoor service. In addition, the Northern Hemisphere is now headed into the cold autumn and winter months, raising odds for a second infectious wave and draconian shutdowns.

Bank of America Securities analyst Gregory Francfort raised their McDonald’s target from $220 to $250 on Monday, noting “the quick service segment as a whole has seen greater demand during COVID than pre-COVID as consumers tired of their own cooking and leaned into drive-thru and off-premise for engagement with restaurants. This can be seen in our aggregated BAC credit and debit card data by industry segment which showed limited service sales in August growing at a faster clip than before COVID”.

Wall Street And Technical Outlook

Wall Street consensus has been highly bullish since the second quarter and has now lifted into a ‘Strong Buy’ rating, based upon 16 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions at this time. Price targets currently range from a low of $195 to a street-high $250 while the stock opened Monday’s U.S. session right at the median $225 target. This mid-range placement can support even higher prices unless analyst bias reverses gears over the winter months.

McDonald’s mounted the August 2019 high at 222 in September and pulled back, crisscrossing the contested level several times. This is typical price action, denoting a testing phase that eventually yields a sustained breakout or a reversal that reinforces resistance. Accumulation readings confirm steady buying interest despite deaccelerating price rate of change, raising odds that bulls will ultimately prevail and the stock rallies toward 250.

For a look at all of today’s economic events, check out our economic calendar.

McDonald’s Rallies To All-Time High

Dow component McDonald’s Corp. (MCD) has defied the odds in the struggling restaurant sector this week, breaking out above the August 2019 high and posting an all-time high near 225. The company added to gains on Wednesday morning after Business Insider reported that a promotion featuring rapper and singer Travis Scott has caused a shortage of burger ingredients due to overwhelming demand.

McDonald’s New Marketing Initiatives

McDonald’s has started to broaden marketing innovation at restaurants that have now reopened around the world, in an effort to energize already improving monthly sales trends. Current and planned initiatives include broader appeals to Millennials, Generation Z, and ethnic users by featuring more “unique and flavorful meals, products that include the new Spicy Chicken McNuggets, and increasing the use of celebrity spokespersons”.

Telsey Advisory Group analyst Bob Derington raised his price target from $210 to $230 last week, telling clients “we believe new products and cross promotions could broaden McDonald’s appeal to some typically hard to reach user groups, adding potential upside to our same store sales estimates. And to build on its sales momentum, before year-end we believe McDonald’s will introduce some new Breakfast product news and follow that with its long-awaited new Chicken Sandwich, designed to be more competitive with Chick-fil-A.”

Wall Street And Technical Outlook

Wall Street consensus is solidly bullish, with a ‘Strong Buy’ rating based upon 16 ‘Buy’, 5 ‘Hold’, and no ‘Sell’ recommendations. Price targets currently range from a low of $195 to a street-high $245 while the stock is now trading $6 above the median $218 target and just $21 below the high target. Given this lofty placement, more analysts may need to raise their targets to support additional upside.

The breakout could run into a roadblock in the next few sessions, with accumulation-distribution indicators near resistance levels that triggered large-scale reversals in August 2019 and February 2020. As a result, new investors should maintain tight stop losses until these bearish divergences come off the books. Fortunately for bulls, it will only take two or three higher-than-average buying volume sessions to complete the task and open the door to 250.

For a look at all of today’s economic events, check out our economic calendar.

Middle-Week Screening: Gold Glitters and Shines!

Overview and trends

US stocks rose on Monday as investors looked to major earnings on deck this week and awaited the release of the GOP’s coronavirus stimulus plan. Senate Majority Leader Mitch McConnell finally said that Republicans were ready to present their long-awaited $1 trillion COVID-19 package details, as Democrats remained wary. S&P 500 ended up 0.74%, while Dow Jones Industrial Average was higher 0.44%, and Nasdaq Composite shot up 1.86%.

US stock indices ended down from 0.65% to 1.27% yesterday as investors mulled Senate Republicans’ coronavirus stimulus package and a slew of very surprising earnings reports.

The U.S. republicans continued debating on its fiscal relief plan most of the day. The projected $1 trillion packages will include another round of $1,200 payment checks and additional funds for small-business loans.

A large portion of reporting yesterday companies sadly missed their earnings figures, with most disappointments coming from 3M, McDonald’s and even biotech Pfizer. Oil tumbled through the session, with West Texas Intermediate crude dropping as much as 1.5%, to $41.10 per barrel.

Gold was the leading instrument in the 1st half of trading week. Gold prices took a stratospheric leap last week, jumping from the previous week’s support test at $1800 an ounce to the $1900 level that hasn’t been traded since 2011.

Next day Gold jumped to a record high of $1944 per ounce, driven by an uptick in new U.S. coronavirus cases that have added to economic uncertainty. Shares of Moderna surged after the company said it received an additional $472 million in funding for its COVID-19 vaccine.

Trading ideas

According to a new court filing, multiple California state offices are actively investigating Amazon (AMZN) over worker safety concerns as the coronavirus continues to rage throughout the U.S. An eighth Amazon employee has died of COVID-19, and the virus has spread quickly through clusters of employees at factory floors and warehouses nationwide where social distancing isn’t enforced. Amazon’s own shipping centers have reported outbreaks, including one in the Pocono Mountains and another in Oregon.

The earnings date for Amazon is July 31, an overwhelming majority of high-profile analysts think the numbers will be as stellar as never before. Amazon’s average EPS estimate is $3.6 versus $5.01 it actually earned last quarter. It’s easy to guess that Amazon will beat that number indeed. However, even the bigger question will be how the tech giant is going to address these mounting allegations about poor safety of its employees. It looks like this time around it’s no longer just curiosity.

Global payments processor Visa reports earnings today, on July 29, and it will be more than just one more set of quarterly financial numbers. Investors will get a direct insight into how consumer spending is being affected by the pandemic and an uncertain economy. This quarter revenue for the payments processing giant are expected to drop by roughly 17% to $4.81 billion versus $5.84 billion a year ago. This anticipated drop has a lot to do with lower transaction volume as many stores were closed throughout the quarter. With that said, there is optimism for a potential beat driven by increased digital payment volume as more and more people shopped online.

Indeed, dealing with paper money has now become not only unsafe but also unsanitary. So VISA’s performance will be more or less accurately reflecting the real global consumer spending, and households’ entire propensity to consume, and how efficient the world’s largest central banks’ and governments’ efforts to offset the COVID-19 impact. So fasten your seatbelts!

The Australian dollar has rallied rather significantly on Monday, showing signs of life yet again as the U.S. dollar continues to get hammered against most currencies. Aussie pierced below 1.40 mark, and now this level became its support, rather than resistance level. A couple of times over the past several trading sessions it tried to approach it, but the big return looked invariably spectacular.

So, this level now can be seen as a cemented support for the Australian currency. Its further growth towards 1.35 is highly dependent on the continuation of the gold rally. Australia is the second-largest gold producer in the world with 325 tons per year, right after China. By the way, 2019 was a record year for Australian gold production.

So, the momentum the Australian currency has been gaining lately is not just a coincidence, and if greenback keeps getting softer, and metals keep getting stronger, it would be hard to find a better choice than to take a chance on the Aussie.

One of the less-talked-about but more potent beneficiaries of this year’s gold rally Kinross Gold (KGC) is scheduled to announce Q2 earnings results today, on July 29th, after market close.

The consensus EPS estimate is 13 cents and the consensus revenue estimate is around $1 billion (assuming a 20% growth Year-over-Year). Over the last 2 years, Kinross Gold has beaten EPS estimates 63% of the time and has beaten revenue estimates 50% of the time.

Kinross is gaining from higher production at its two main deposit fields, which already had shown strong momentum in this year’s first quarter. Strong production is likely to have continued in the second quarter. Further, gold prices have been soaring this year making it the most attractive safe-haven asset. Gold prices have gained around 13% in the second quarter — the highest quarterly percentage increase in more than four years.

by Vladimir Rojankovski, Grand Capital Chief Analyst

McDonald’s Q2 Global Sales Slump Nearly 24% as COVID-19 Pandemic Bites; Target Price $209

McDonald’s Corp, one of the world’s largest American fast-food chain, reported that its global sales plunged about 24% in the second quarter as restaurants were closed due to the COVID-19 pandemic, sending its shares down about 2% pre-market.

So far, the deadly virus has infected more than 16.57 million people in 210 countries and killed over 650 thousand, wherein the United States is the worst hit, leading the global foodservice retailer to halt reopening of its U.S. restaurants for 21 days early this month.

The leading global foodservice retailer, McDonald’s has over 36000 restaurants in more than 100 countries around the world, said its second-quarter same-store sales worldwide plunged about 24% and declined nearly 9% in the United States, where it operates more than a third of its restaurants.

The company’s revenue fell 30.5% to $3.76 billion, net income fell 68% to $483.8 million. McDonald’s said about Substantially all restaurants were operating drive-thru, delivery, and/or take-away with a limited menu.

Just after the announcement, McDonald’s shares dipped about 2% to $198.50.

Executive comment

“Our strong drive-thru presence and the investments we’ve made in delivery and digital over the past few years have served us well through these uncertain times,” said chief executive officer Chris Kempczinski said.

“We saw continued improvement in our results throughout the second quarter as markets reopened around the world. We’re confident that the strong foundation we’ve built, combined with the unique advantages of our System, position us well to continue operating successfully during this pandemic and emerge even stronger.”

McDonald’s stock forecast

Twenty-four analysts forecast the average price in 12 months at $209.09 with a high forecast of $230.00 and a low forecast of $178.00. The average price target represents a 3.90% increase from the last price of $201.25. From those 24, 20 analysts rated ‘Buy’, four analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $207 with a high of $255 under a bull scenario and $143 under the worst-case scenario. Evercore ISI raised its target price to $210 from $200; Keybanc raised the price target to $215 from $200 while Independent Research lowered its target price to $190 from $195; rated ‘Hold’.

Several other equity researches have also recently upgraded their stock outlook. BMO raised the target price to $220 from $215, Suntrust Robinson raised the target price to $208 from $195, Jefferies raised it to $220 from $208. Cowen and Company raised it to $210 from $208, Piper Sandler raised the target price to $190 from $170 and Stifel raised it to $182 from $175.

Analyst comment

“Best-in-class asset quality, scale in advertising, other areas = structural advantages. Experience of Future (EOTF) reimages enable digital and delivery sales. MCD spends materially more on reimaging than average peers. ROIC rising, capex to fall, and FCF and return of capital to accelerate post ’19, after accounting for COVID-19 disruption,” noted John Glass, equity analyst at Morgan Stanley.

“Refranchising to 95% mostly complete, with operating margins in the mid-40% range, improved FCF and lower earnings volatility. Defensive stock, both in terms of fundamentals and low stock price volatility; better positioned for uncertain demand environment,” he added.

Stock Pick Update: July 22 – July 28, 2020

The broad stock market has extended its uptrend in the last five trading days (July 15 – July 21). The S&P 500 index broke above its early June local high and it got closer to 3,300 mark. More than three months ago on March 23, the market sold off to new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears have erased more than a third of the broad stock market value. Right now the index is just 4.01% below the record high.

The S&P 500 index has gained 0.97% between July 15 and July 21. In the same period of time our five long and five short stock picks have lost 0.21%. Stock picks were relatively weaker than the broad stock market. Our long stock picks have lost 0.28% and short stock picks have resulted in a loss of 0.14%. However, the overall results remain relatively better than the S&P 500 index over last months.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • July 21, 2020
    Long Picks (July 15 open – July 21 close % change): DOW (-1.40%), INTC (+2.83%), MCD (-0.47%), XOM (-0.84%), HST (-1.54%)
    Short Picks (July 15 open – July 21 close % change): COG (+4.57%), VNO (-5.52%), AON (+2.30%), LIN (+1.36%), AAPL (-2.01%)Average long result: -0.28%, average short result: -0.14%
    Total profit (average): -0.21%
  • July 7, 2020
    Long Picks (July 1 open – July 7 close % change): INTC (-2.67%), F (+0.33%), PPG (+2.17%), DTE (-0.35%), AIG (-5.93%)
    Short Picks (July 1 open – July 7 close % change): XEL (+2.00%), BLK (+0.91%), EOG (-5.72%), MSFT (+2.52%), EBAY (+8.14%)Average long result: -1.29%, average short result: -1.57%
    Total profit (average): -1.43%
  • June 30, 2020
    Long Picks (June 24 open – June 30 close % change): WY (+0.36%), CTSH (+3.76%), HIG (-0.57%), BSX (-2.39%), COP (-2.28%)
    Short Picks (June 24 open – June 30 close % change): EW (-1.51%), WMB (0.00%), ETR (-0.27%), CCI (+2.04%), ADBE (-1.07%)Average long result: -0.23%, average short result: +0.16%
    Total profit (average): -0.04%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, July 22 – Tuesday, July 28 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (July 22) and sold or bought back on the closing of the next Tuesday’s trading session (July 28).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Materials, 1 x Consumer Discretionary, 1 x Technology
  • sells: 1 x Energy, 1 x Real Estate, 1 x Financials

Contrarian approach (betting against the recent trend):

  • buys: 1 x Energy, 1 x Real Estate
  • sells: 1 x Materials, 1 x Consumer Discretionary

Trend-following approach

Top 3 Buy Candidates

MLM Martin Marietta Materials – Materials

  • Stock broke above the downward trend line
  • Potential medium-term uptrend continuation
  • The resistance level of $230

MCD McDonalds Corp. – Consumer Discretionary

  • Stock broke above month-long downward trend line
  • The resistance level of $200 (short-term upside profit target)
  • The support level remains at $180

INTC Intel Corp. – Technology

  • Stock remains above medium-term upward trend line
  • The resistance level and upside profit target level at $65
  • The support level is at $56-57

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Materials, Consumer Discretionary and Technology sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Stock Pick Update: July 15 – July 21, 2020

The broad stock market has been advancing between July 1 and July 7. The S&P 500 index got closer to its early June medium-term local highs again. More than three months ago on March 23, the market sold off to new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears have erased more than a third of the broad stock market value. Then we saw huge come-back rally, as the index got back above 3,200 mark.

The S&P 500 index has gained 1.27% between July 1 and July 7. In the same period of time our five long and five short stock picks have lost 1.43%. Stock picks were relatively weaker than the broad stock market. Our long stock picks have lost 1.29% and short stock picks have resulted in a loss of 1.57%. However, the overall results remain relatively better than the S&P 500 index over last months.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • July 7, 2020
    Long Picks (July 1 open – July 7 close % change): INTC (-2.67%), F (+0.33%), PPG (+2.17%), DTE (-0.35%), AIG (-5.93%)
    Short Picks (July 1 open – July 7 close % change): XEL (+2.00%), BLK (+0.91%), EOG (-5.72%), MSFT (+2.52%), EBAY (+8.14%)Average long result: -1.29%, average short result: -1.57%
    Total profit (average): -1.43%
  • June 30, 2020
    Long Picks (June 24 open – June 30 close % change): WY (+0.36%), CTSH (+3.76%), HIG (-0.57%), BSX (-2.39%), COP (-2.28%)
    Short Picks (June 24 open – June 30 close % change): EW (-1.51%), WMB (0.00%), ETR (-0.27%), CCI (+2.04%), ADBE (-1.07%)Average long result: -0.23%, average short result: +0.16%
    Total profit (average): -0.04%
  • June 23, 2020
    Long Picks (June 17 open – June 23 close % change): BA (-3.41%), DLR (-0.81%), WLTW (+1.27%), BMY (+2.05%), HSY (-2.03%)
    Short Picks (June 17 open – June 23 close % change): DHR (-0.23%), CLX (+1.76%), AEP (-1.58%), MMM (-1.47%), PLD (-6.67%)Average long result: -0.58%, average short result: +1.64%
    Total profit (average): +0.53%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, July 15 – Tuesday, July 21 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (July 15) and sold or bought back on the closing of the next Tuesday’s trading session (July 21).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Materials, 1 x Technology, 1 x Consumer Discretionary
  • sells: 1 x Energy, 1 x Real Estate, 1 x Financials

Contrarian approach (betting against the recent trend):

  • buys: 1 x Energy, 1 x Real Estate
  • sells: 1 x Materials, 1 x Technology

Trend-following approach

Top 3 Buy Candidates

DOW Dow Holdings Inc. – Materials

  • Stock broke above over month-long downward trend line
  • Potential medium-term uptrend continuation
  • The resistance level of $46 (short-term upside profit target level)

INTC Intel Corp. – Technology

  • Stock remains above medium-term upward trend line
  • The resistance level and upside profit target level at $61-65
  • The support level is at $56

MCD McDonalds Corp. – Consumer Discretionary

  • Stock broke above downward trend line
  • The resistance level of $200 (short-term upside profit target)
  • The support level remains at $180

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Materials, Technology and Consumer Discretionary sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

McDonald’s Could Have Tough Time Rebuilding Lost Revenue

McDonald’s Corp. (MCD) got battered and bruised in the first quarter, with operations all over the world shutting down due to the coronavirus pandemic. The fast food king recovered part of the slack with pick-up and delivery services but franchise operators suffered badly because the company also acts as the landlord in most cases, collecting lease payments. Given the massive headwinds, Q1 2020 revenue contraction of 6.2% year-over-year made perfect sense.

Slow Progress On Business Resumption

Franchisees are now reopening in accordance with local jurisdictions, with most locations requiring social distancing and other safety measures. Results have been encouraging but mixed so far, with May U.S. comparative sales dropping 5.1% year-over-year compared to 19.2% in April. Worldwide sales have underperformed those mixed metrics, dropping 20.9% in May and a whopping 39.0% in April. Even so, Mickey D just announced it will hire about 260,000 employees this summer to fulfil growing demand.

SunTrust analyst Jake Bartlett just raised McDonald’s price target to $208, advising that comparative sales were better than expected, noting “excluding the impact of temporary store closures, we estimate that international sales per store are ‘flat’ to down slightly, demonstrating strong demand as markets re-open. We expect MCD’s $200 million supplemental ad fund contribution to help drive positive global same store sales by Q4 2020 (Q3 2020 for the U.S.)”

Wall Street And Technical Outlook

The rest of Wall Street is generally bullish on the stock as well, with 22 ‘Buy’ and 7 ‘Hold’ recommendations. No analyst is recommending that investors sell shares at this time. Price targets currently range from $170 to a street high $245 while McDonald’s is now trading just 13 points above the low target. This placement is a two-edged sword because, while it offers plenty of room for growth, the sub-par performance could be hiding undisclosed headwinds.

The stock has been an outstanding performer since 2015 when it broke out above 4-year resistance near 100. It more than doubled into August 2019’s all-time high at 222 and turned lower in a persistent downtrend that accelerated in the first quarter of 2020. The second quarter bounce has recovered about two-thirds of the downside but the recovery wave has now reached tough resistance in the 190s. This is a natural location for short sellers to reload positions.

Equities Sink On Global Tensions, VIX Jumps 20%; Earnings Still In Focus

The Jamal Khashoggi Killing Has Markets On Edge

Global tensions sent equities markets around the world diving for cover. Fear of slowing growth, the fallout from the US-Sino trade war, and the killing of journalist Jamal Khashoggi all played a part. Asian markets were down the most falling an average 2.5% to 3.0% at the close of the Tuesday session. Indices in the region are trading at or near long-term low levels with the Korean Kospi hitting a near 20 month low with today’s action. The Volatility Index rose more than 20%.

European markets were down an average -1.0% to -2.0% at mid-day, up off the low of the session but still at or near their own 20-month lows and indicated lower. Focus in this region is on the murder of Khashoggi which is turning into a major international event. The journalist, a self-imposed exile from Saudi Arabia, has deep ties to the US, EU and other major western powers who are now faced with the problem of how to deal with the Saudi’s now the cat is out of the bag. The Saudi’s have promised not to weaponize oil but the crisis is far from over.

The Tech Wreck

Technology stocks were hit the hardest in the EU session. Chipmaker AWS led with a loss near -25% as the companies outlook for year-end sales was not convincing enough for shareholders to stand pat. AWS released earnings yesterday delivering a near 50% increase in revenue with upbeat guidance for the final three months of the year.

Tech stocks led Tuesday’s route in both the EU and the US. US futures were indicated down an average 1.5% to 2.0% going into the opening bell and looking weak despite a round of positive earnings releases. Reports from United Technologies, Harley Davidson, Verizon and McDonald’s all beat analysts expectations on the top and bottom lines sending shares of these stocks higher in early action.

US Corporate Earnings Are Strong, Outlook OK

United Technologies and Harley Davidson were able to raise guidance, executives at HOG say stronger sales in the EU have helped to offset issues with tariffs and were a boost to earnings. Verizon’s beat was driven by better than expected subscriber growth. On the flipside, shares of Caterpillar fell more than -6.0% despite its top and bottom line beat due to poor outlook and weak guidance. The company says tariffs and trade woe are having an impact on profitability but was able to reaffirm its guidance. The problem for traders is that guidance was in a range with the lower end well below analysts consensus.

McDonald’s beat was driven by strong comp store sales. Comps in the US rose a strong 2.4%, just shy of the 2.5% estimated, but global comps rose a whopping 4.2%. Analysts had been expecting a more tepid 3.7% but strength was seen in the lead international markets, up 5.4%, and in the high-growth target market, up 4.6%. There is no economic data scheduled for today so traders will be focused on earnings and global headlines. Notable earnings after the close of Tuesday’s US session are Chubb, Texas Instruments, and iRobot.