Shares of McDonald’s Corporation declined 0.49 percent to $117.94, as the world’s largest chain burger struggle to edge higher after the disappointing earnings report few weeks ago. However, there could be a change of direction in the coming quarters after it closed a deal with the sensational Pokemon Go.
McDonalds had the biggest slump after its second quarter earnings report disappointed the market. The stock traded at $116.40, the lowest for this year right after its report. McDonalds shares dropped by 3 percent after a reported net income of $1.09 billion or $1.25 per share, missing the estimated $1.38 per share on $6.27 revenue.
The prominent fast food chain had a same store sales increase of 3.1 percent worldwide, while in the U.S. alone the advance stood at 1.8 percent only, far from the forecasted 3.4 percent growth by the expert.
From then on, the company struggled to accumulate gains- probably the investors lost their appetite for the stock. Prior to the earnings report, McDonalds was reported of closing 500 stores in the entire year of 2016. In 2015, the company also closed around 700 restaurants as they decided to cut costs and save the company from losing money. Though, it was a wise move for McDonalds to cut the loss, the fact that it might be suffering couldn’t be hidden.
Previously, the stock opened at $118.81 and closed at $117.94, a little lower from the $118.52 at the start of the week. McDonalds had a price earnings ratio of 22.48 with a dividend yield of 3.02 percent. The fast-food chain had a total of 3.24 million shares traded for the day with a per share move of $0.58. On average, the stock has a total float of 853.36 million shares and moves 4.9 million per day.
The stock stayed below the 50 level at and couldn't break the resistance at 119.00. The support remained at 122.35 in daily basis.
McDonalds has a 200-day simple moving average of $119.52 and a 50-day SMA of $121.31 with a 12-month high of $131.96 and a 12-month low of $87.50. Analysts from FSM News reiterated its neutral rating for the stock and a price target of $130.
Pokemon Go Deal
However, there was a change of trend when the company had been speculated of having a partnership with the sensational Pokemon Go creator Nintendo. As the mobile game application thrilled the Pokemon aficionados, the stocks of Nintendo soared and even the other equities turned out to be one of the best performers on the market. As the market remained perceptive with the deal between the two companies, McDonalds managed to climb in few successive sessions.
McDonalds announced that it would be hosting 3,000 gyms or battle locations of the game. The rationale? More visitors would mean more sales. Although it went back to the traditional location based advertising, it seems effective to accumulate profit, especially in Japan where even the foreigners busts in just for the game. In return, investors had started to gain confidence in the stock. The Japanese market remained to be one of the weakest chain of Mcdonalds, that’s why the partnership could change the sales figures in the next quarterly earnings report.
Niantic, one of the developers of the game, confirmed that they were still seeking more sponsorship for Pokemon Go. McDonalds Japan has been the key place for Pokemon enthusiasts. However, the craze has been slowing down and a lot of companies have used the application to lure more users for their own benefit. Thus, the stock started to slow down from the previous sessions.
Last May, shares of the company soared higher after the Grand Opening of Ronald McDonald House in Windsor. The new building set optimistic trend for the stock as it touched $130.58 (see the chart below). Consequently, the fast-food chain launched its Teacher Appreciation Day in Arizona and Parker.
Something seems to be evident here, McDonalds could still find it hard to grab the green line in the coming days, however, this doesn’t mean the trend would persist. McDonalds still remains to be the largest operator in terms of revenue and offers the cheapest meal compared with its major competitors. As the company keeps the affordable meals, the company will remain firm.
In 2013, a study showed that eight in ten Americans still chose fast-food monthly and almost half said they eat fast food at least weekly. In addition to, fast food restaurants serve around 50 million customers per day in America and McDonald’s sells approximately 75 hamburgers per second.
Although, the company might reduce the number of stores, the 35,000 McDonalds locations in America could still do the job. Looking through the short term performance of the stock it might stay low, but in the long term, it will likely trade higher ahead of its third quarter earnings report on October 21.
Further, the impact of the recent deals and product innovation would be seen soon. In case McDonalds reports a weak earnings report, it must find an alternative stimulus right away. Though it was a bit of a cliché, but in the stock market, history repeats.