5 Reasons Why I'm Not Buying McDonald's Right Now

Franchisee Tensions and Unsustainable $5 Value Meal

McDonald’s, as a global fast-food giant, has been facing some internal tensions with its franchisees. The company has recently introduced a $5 value meal, aimed at attracting low-income consumers. However, the franchisees have stated that this meal option is unsustainable, with their profit margins only ranging from 10-15%. This has led to a battle between the corporate headquarters and the franchisees, as the corporation wants to cater to the low-income market, while the franchisees struggle to maintain profitability.

Loss of Identity as a Cheap and Convenient Option

McDonald’s has long been known for its cheap and convenient dining options. However, with the pricing of the $5 value meal being similar to that of sit-down restaurants like Applebee’s, the company has lost its identity as a budget-friendly choice. Consumers now have the option to enjoy a full dining experience for a similar price, which could lead them to opt for those alternatives over McDonald’s.

Declining Popularity and Public Perception

In recent years, we’ve seen various companies face backlash from consumers due to their perceived stances on certain issues. This phenomenon, often referred to as “go-woke, go-broke,” has had a significant impact on the public’s perception of brands. McDonald’s, as a large and well-known corporation, is not immune to this trend. If the public starts to turn against the company, it could have a detrimental effect on its stock price.

Insider Selling and Institutional Ownership

One of the trading indicators I use is insider activity. In the case of McDonald’s, there has been a significant increase in insider selling over the past three months. This, combined with the fact that 72% of the company’s stock is owned by institutions, raises concerns about the long-term prospects of the company.

Unfavorable Technical Analysis

When I look at the technical analysis of McDonald’s, I see a bearish trend. The stock has recently double-topped near the $300 level and is now trading below both the 50-day and 200-day moving averages. This technical setup, coupled with the fundamental issues the company is facing, makes me hesitant to invest in McDonald’s at this time.

In conclusion, while McDonald’s has a strong monthly chart and a decent dividend, the combination of internal tensions, loss of identity, public perception concerns, insider selling, and unfavorable technical analysis leads me to believe that the risks outweigh the potential rewards at the moment. I will be closely monitoring the situation, but for now, I am not buying into McDonald’s.