McDonald’s Corporation (MCD): A Bull Case Theory

Core Thesis - McDonald's Corporation is viewed as a strong investment opportunity due to its unique business model that combines real estate, technology, and franchising, positioning it as a low-risk, high-margin entity rather than a traditional fast-food chain [2][3][6] Business Model - McDonald's operates over 43,000 locations globally, owning approximately 45% of the land and 70% of the buildings, which contributes to its substantial real estate assets valued at $42 billion [2] - The company has a franchising model where nearly 93% of its restaurants are franchised, allowing it to collect rent and royalties, resulting in an impressive 82% operating margin on franchise revenue [3] Financial Performance - McDonald's maintains a dividend yield of 2.24% and generates significant free cash flow, enhancing its attractiveness as an investment [3] - The stock was trading at $318.73 as of December 15th, with trailing and forward P/E ratios of 27.02 and 23.92 respectively [1] Growth Catalysts - The ongoing digital transformation, including partnerships with Google Cloud, is expected to drive revenue gains through AI-powered systems and enhanced consumer engagement via a loyalty platform with 185 million active users [4] - Expansion plans include opening approximately 2,200 new restaurants in 2025 and targeting 50,000 locations by 2027, which will further increase rent, royalties, and data collection [5] Investment Outlook - With a low beta of 0.52 and high institutional ownership, McDonald's is seen as a compelling investment, with potential stock price growth towards $400+ by the end of 2026 due to long-term catalysts [6] - The company's strong free cash flow and disciplined share repurchases have contributed to a stock price appreciation of approximately 6.75% since previous bullish coverage [7]