Fast food diners are not ”Lovin’” McDonald’s Value Meal Menu, the “$1 $2 $3” menu is barely bringing pennies to the Golden Arches’ bottom line and RBC has cut MCD’s price target $20 (or 10 Sausage McGriddles) to $170. Overall weakness in the fast food/casual dining sector was an expected headwind to MCD’s profitability but the lack of a “winning” menu item, which increases customer visits, has become a short term anchor to MCD’s resurgence.
Overall short interest in the Restaurant sector has been on the rise, with short interest increasing by $346 million over the last month, reaching $12.2 billion this week. Short sellers are increasing their exposure to the sector, especially in the top three shorts.
Today’s 5% price drop in McDonald’s stock price added $60 million of mark-to-market profits to MCD’s short sellers, bringing year-to-date mark-to-market profits to $172.6 million, or +14.95%.
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Managing Director Predictive Analytics, S3 Partners, LLC
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