Wells Fargo started off coverage on McDonald's Corporation ( NYSE: MCD ) with an Equal Weight rating.
While the restaurant stock is seen as a high-quality, defensive play, with clear trade-down benefits - analyst Zachary Fadem and team think valuation discipline and risks around European exposure warrant a trip to the sidelines on the stock.
"While there's clearly a lot to like, and a premium multiple is undoubtedly warranted, it's our job to find mispriced assets, and we don't believe MCD is one of them today. Street expectations are high, and with shares +2 standard deviations above the LT relative mean, we await a better entry point."
In regard to Europe, McDonald's ( MCD ) is said to have higher relative exposure to heightened recession risk and elevated inflation on the continent vs. peers.
Wells Fargo assigned a price target of $280 on MCD, which works out to 24.5X the FY24 EPS estimate or 17.5X EBITDA.
Shares of McDonald's ( MCD ) traded flat in premarket action at $269.35.
Read the latest breakdowns on McDonald's from Seeking Alpha authors.
For further details see:
McDonald's is viewed cautiously by Wells Fargo due to valuation, Europe risks