The fast-food chain giant, McDonald’s (MCD), had been navigating a backdrop of consumer pressure and rising price sensitivity since last year—particularly in the U.S. However, throughout 2025, the company has gradually demonstrated that its pricing power remains intact, with global comparable sales steadily returning to the 3–4% range. The most recent Q3 results reinforced that trend, which helped drive a positive reaction in the stock, although year-to-date performance remains relatively muted. The stock has endured range-bound trade between $280-$325 all year.
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As a result, the market has shifted back to applying a quality premium to McDonald’s, rather than valuing it like a cyclical name. And while long-term valuation models suggest the stock looks fully priced, or even a bit optimistic, it’s important to recognize what the market is actually paying for: McDonald’s is effectively a global royalty machine, supported by scale in culture, real estate, and brand—and not just a burger chain.
While the stock commands a premium, it is not unjustifiably expensive. I’m maintaining a Neutral stance here, mainly because the path to further upside depends on the company sustaining healthy comp sales over time and executing consistently in line with (or above) its long-term strategic targets. Without that continued momentum, the risk-reward skews more towards on-trend continuity rather than meaningful outperformance.
Q3 Proved McDonald’s Still Has Pricing Power
The most crucial metric that dictates whether the McDonald’s investment thesis progresses or stalls is comparable sales growth. This figure illustrates the sales performance in existing restaurants compared to the same period last year, excluding newly opened or recently closed stores. In other words, it’s the cleanest indicator of actual demand, brand relevance, pricing power, and traffic health.
As shown in the chart below, McDonald’s global comp sales had been trending downward through late 2023 and into early 2025, eventually reaching -1% YoY in the March quarter—coinciding with shares dipping below $290. However, the narrative shifted in the June quarter (Q2 2025), when comparable sales re-accelerated to 3.8%, signaling that the company still retained meaningful pricing power and consumer relevance.
In Q3, comp sales came in slightly lower at 3.6% YoY. Even so, the market response was positive because the comparison was to expectations, not to the prior quarter. And with the Street looking for 3.5%, McDonald’s delivered a modest beat.
More importantly, the quarter carried a more constructive tone of implicit guidance. Management emphasized that Q3 reflected sustainable growth in a challenging environment, suggesting that the improvement wasn’t a one-off event. In addition, systemwide sales (a broader measure that captures demand, unit expansion, and franchise royalties) grew 6% YoY in constant currency, reinforcing that growth was structural, not just driven by pricing. Operating income increased 5% YoY, without margin compression, even in the face of labor and commodity cost inflation.
If comp growth had depended heavily on discounting, margins would have weakened. The fact that margins held confirms that demand was healthy and pricing power remains intact.
What the Current Valuation Is Pricing In
If Q3 signaled to the market that McDonald’s still enjoys healthy price elasticity and solid operational efficiency, the question now becomes where the stock can go from here over the long term.
According to McDonald’s own long-term strategic guidance, the company aims to grow net new units by around 4–5% annually, sustain comparable sales growth in the 3–4% range over time, gradually expand operating margins, increase capital expenditures by roughly $300 to $500 million per year until 2027, and maintain free cash flow conversion near 90% of net income.
When we model these assumptions within a discounted cash flow framework, the valuation appears quite optimistic. Under a scenario aligned directly with the company’s long-term plan—i.e., ~7% structural revenue growth per year over the next five years—McDonald’s still benefits from its highly franchised (95% of restaurants) and asset-light structure, which supports operating margins above 45% and a powerful cash conversion.
On one hand, the planned step-up in CapEx is designed to accelerate system expansion, rather than defend margins. And significantly, it does not impair the company’s ability to continue repurchasing shares and paying dividends, which remains central to the McDonald’s shareholder return profile.
However, applying a defensive terminal growth rate of 2.7%, discounting cash flows at a 7.25% WACC, and adjusting for approximately $47 billion in net debt results in an equity value of roughly $159 billion, or about $216 per share. Compared to the current share price near $300, that implies an approximate 28% downside from today’s levels.
Upside Requires Acceleration
It’s essential to note that, although McDonald’s shares are trading at what appear to be “expensive” multiples, this does not necessarily mean the stock is overvalued. McDonald’s is a rare business in the consumer space: it delivers high recurrence of demand, extremely low earnings volatility, and operates under an asset-light franchising model that converts profit into free cash flow with remarkable consistency. Free global publicity every time the U.S. President takes the spotlight also boosts Tesla’s intangibles—strengthening brand recognition, customer loyalty, and overall cultural visibility.
Additionally, the company has nearly five decades of uninterrupted dividend growth, further reinforcing the predictability and durability of its cash return profile.
In this context, paying a premium for stability makes sense. The issue isn’t whether McDonald’s deserves a quality multiple—it clearly does—but whether there is meaningful upside beyond that. In my view, to justify a share price around $300, the underlying scenario would need to include sustained comparable sales growth above 4% and operating margins holding above 46% with continued incremental expansion. The recent results suggest that this level of performance is possible in the coming quarters, which explains why the market has been comfortable assigning a higher valuation.
However, from a practical perspective, I struggle to see a sufficiently compelling upside case that would allow McDonald’s to outperform the broader market from current levels, even when factoring in a dividend yield of 2.28% as an added tailwind.
Is McDonald’s a Buy, Hold, or Sell?
There are currently more Wall Street analysts on the fence than bullish when it comes to McDonald’s. Among the 24 analysts who have issued ratings over the past three months, 11 recommend Buy, while 13 rate the stock as Hold. The average price target is $323.79, implying a potential upside of about 8.25% from the latest share price.
A Strong McDonald’s Story with Not Much Room to Run
McDonald’s delivered a solid Q3, with comp sales coming in above expectations and margins holding firm. This suggests that the recent growth is being driven by pricing power rather than discounting, which supports a more constructive outlook heading into Q4. The quarter was a pleasant upside surprise and justified the short-term positive reaction in the stock.
That said, I wouldn’t argue that McDonald’s is “overpriced,” but rather fully priced to execute on its strategic plan with very little room for error. The premium makes sense given the company’s predictable, stable, and cash-generating profile. However, for the stock to offer meaningful upside from current levels, I believe we would need to see a more pronounced acceleration in comparable sales and incremental expansion in operating margins. Given that, I maintain a Hold rating on MCD for now.