By In a recent report, Wells Fargo analysts have downgraded Yum! Brands, the parent company of KFC, Pizza Hut, and Taco Bell, from Overweight to Equal Weight. They have also lowered the price target for Yum! stock to $135 from $150. While acknowledging that Yum! is a well-run business with strong brands and a global presence, the analysts are less optimistic about its future prospects.
Despite Yum!’s successful efforts in increasing unit growth, widening operating margins, and implementing various strategies such as loyalty programs, in-store kiosks, and artificial intelligence, the analysts predict that the company will face challenges in 2024. Slowing traffic, moderating price gains, and a shift towards value are expected to impact its growth trajectory. Additionally, Yum! has decided to temporarily suspend share buybacks to focus on reducing debt.
In contrast, Wells Fargo remains bullish on McDonald’s stock and considers it a top idea for 2024. They have increased the price target for McDonald’s stock to $325 from $310 and maintain an Overweight rating on the company. The analysts believe that McDonald’s is well-positioned for future macroeconomic scenarios. They cite accelerating growth, investments in loyalty programs, and the potential long-term benefits of CosMc’s—a new drink-focused chain introduced last year—as significant drivers of upside potential.
In terms of stock performance in 2023, Yum! shares gained only 2%, significantly trailing behind the broader market’s 24% increase as measured by the S&P 500 index. Meanwhile, McDonald’s stock also lagged behind but still achieved a respectable gain of 13%, outperforming Yum!.
As of Thursday trading, Yum! shares were down 0.5% to $128.54, while McDonald’s stock experienced a slight decrease of 0.1% to $293.77.
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