Equity Firm Downgrades McDonald’s Stock
Equity analysis firm Redburn Atlantic lowered its rating on McDonald’s stock by two notches from “buy” to “sell,” warning that the widespread use of GLP-1 drugs, which curb appetite and help regulate blood sugar, may change how Americans eat, potentially leading to a drop in millions of visits to McDonald’s every year, as per CBS News.
How GLP-1 Medications Could Disrupt Fast Food Demand
The Redburn analysis described GLP-1 drugs like Ozempic and Wegovy as “demand disruptors” for restaurants like McDonald’s, as they reduce consumers’ appetites and limit the number of calories they consume each day, reported CBS News. Analysts wrote that, “These features of the drugs could have serious implications for the restaurant industry,” according to the report.
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McDonald’s Potential Revenue Losses and Customer Visit Declines
Analysts Chris Luyckx and Edward Lewis estimated that McDonald’s could lose up to 28 million customer visits annually, resulting in nearly $482 million in lost revenue, roughly 0.9% of the company’s sales, according to the report.
Their concern is that GLP-1 drugs may shift eating habits, especially among lower-income consumers, who are the fast food chain’s target market and who might cut back on dining out and keep those new habits long-term, as per CBS News.The analysts pointed out that the “Behaviour changes extend beyond the individual user — reshaping group dining, influencing household routines and softening habitual demand. A 1% drag today could easily build to 10% or more over time, particularly for brands skewed toward lower income consumers or group occasions,” quoted CBS News.
Inflation Adds Fuel to McDonald’s Challenges
Adding to the pressure, rising prices and inflation might make it even harder for McDonald’s to maintain its appeal to its customers, as per the report. The analysts highlighted that, “Consumers are showing clear signs of pricing fatigue after years of aggressive menu inflation,” adding, “Although the gap between eating out and at home has narrowed, it remains historically wide, reinforcing value concerns,” quoted CBS News.
Not Many Americans Are Using These Drugs Yet
However, the adoption of the GLP-1 drugs has yet to reach a wider audience, as only 12% of Americans have tried the drugs, and currently just 6% of the adult population uses them, as per the report.
While, the managing director and restaurant and food distributors analyst at BTIG global financial services, Peter Saleh said, “I don’t think there would be a meaningful GLP-1 impact on McDonald’s right now, but that’s not to say that in three or four years that won’t be the case,” adding, “I just don’t think we are there yet,” quoted CBS News.
FAQs
What are GLP-1 drugs like Ozempic?
They’re medications that help regulate blood sugar and suppress appetite, often used for weight loss, as per reports.
How much money could McDonald’s potentially lose?
Up to $482 million a year, according to some analysts.
