Upbeat prospects at global quick-serve restaurant chains Starbucks and McDonald’s (MCD) should boost both companies’ shares, according to new research.
Shares of Starbucks (SBUX) closed $74.18 on Wednesday. Baird analyst David Tarantino boosted his price target on the company from $74 to $80, above FactSet’s $70 average.
McDonald’s stock closed $188.13 on Wednesday, while Tarantino raised his price target for the shares to $205 from $196. The average target among analysts tracked by FactSet is $198.
Tarantino has Outperform ratings on both stocks.
Starbucks stock is up more than 14% this year, just ahead of the broader S&P 500, as investors have gotten behind the company’s plans for sustaining its domestic performance while battling competition in foreign growth markets.
“We were encouraged by the improvement in top-line trends for Starbucks exiting fiscal 2018 and entering fiscal 2019,” Tarantino wrote. (Global same-store sales rose 3%, and 4% in the U.S., in the fiscal year ended Sept. 30.)
“We are optimistic the company has the drivers in place to sustain solid top- and bottom-line momentum in upcoming quarters, which in turn, should contribute to continued positive sentiment on the shares.”
McDonald’s shares are up roughly 6% this year, a bit less than half the return of the S&P 500, though the stock outperformed the market in 2018 amid renewed interest in more defensive companies. That might help them this year, too, according to some analysts.
Tarantino said he expects the fast-food chain to “produce healthy global operating results in 2019 and beyond, including a possible inflection in same-store sales momentum in the U.S.” Same-store sales growth in the U.S. underperformed global comparable-store sales last year.
“We also think McDonald’s relatively defensive business model (i.e., stable earnings and cash flows) offers a relatively attractive profile in the current market backdrop,” he wrote.