Credit: Shutterstock photoMcDonald's ( MCD ) competes with Wendy's ( WEN ), Burger King, and Yum! Brands ( YUM ) in the fast food market, and is the market leader with about 19% share. The company also competes with Starbucks ( SBUX ) in the specialty coffee market. McDonald's owns and franchises restaurants across the globe with over 32,000 restaurants in 117 countries. Of these, roughly 80% are operated by franchisees, with the balance being company-owned. We estimate that franchisee rent & fees accounts for 62% of McDonald's stock value with franchisee royalties generating an additional 29%. The remaining 9% comes from company-owned restaurants.
We currently maintain a $78.40 price estimate for McDonald's stock , which is slightly ahead of market price.
Ronald McDonald's Chain is a Hit in Asia
McDonald's is looking for growth in fast growing emerging markets where the recent economic downturn has had much less of an impact on consumer spending. The company hopes this will offset the sluggish U.S. sales growth reported in February. In Malaysia, McDonald's expects sales to be up by 20% in 2011. It has 204 restaurants in Malaysia and plans to open 21 more this year, aiming for 300 outlets by end of 2014.
In India it plans to have 30 new restaurants in 2011. India has especially been identified as a lucrative market by the company owing to the fact that its demographics favors fast food chains. In India, it is estimated that more than 60 percent of the population, that is around 700 million people, are under the age of 30.
The number of McDonald's franchised restaurants have been steadily increasing, reaching around 27,200 in 2010. Going forward, we expect this number to reach around 29,000 by the end of our forecast period, an average annual growth rate of 1%. However, backed by encouraging results, McDonald's may fast forward its expansion plans in emerging markets of Asia. During our forecast period, if the number of McDonald's franchised restaurants increase at a rate 150 basis points higher than our projected growth rate, reaching around 33,000 by the end of our forecast period, it would result in an upside of around 10% to our current price estimate for McDonald's stock.
See our full analysis for McDonalds
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
