McDonald's, Domino's to top the proverbial food chain in '24
While the Federal Reserve appears to be making a dovish pivot, many on Wall Street have argued that a recession is still a possibility for 2024. Investors often look for recession proof investments during times like these, including food and beverage stocks. Peter Saleh, BTIG Restaurants and Food Distributors Analyst, joins Yahoo Finance to give his picks highlighted in his firm's 2024 Investors Guide: McDonald's (MCD) and Domino's (DPZ).
Saleh gives McDonald's a "buy" rating with a price target of $300 per share, claiming: "They're accelerating development, especially in the US. That is accelerating pretty significantly over the next several years."
For Domino's, Saleh is also bullish, giving a "buy" rating with a $465 price target per share, claiming: "They're already seeing an acceleration in traffic, and in same-store sales that happened in the fourth quarter. We think that continues into 2024."
Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.
Video Transcript
BRAD SMITH: Also everyone, there's a lot of uncertainty on the horizon as we head into 2024. Investors have been cheering on the Federal Reserve's dovish pivot, but there's still the possibility that the US could see a recession next year. Amid an economic slowdown, where should you be investing? Well, McDonald's and the Golden Arches might just be the perfect play. For more on recession-proofing your portfolio, let's bring in Peter Saleh, who is the restaurants and food distributors analyst for BTIG as part of Yahoo Finance's 2024 investor. Guide. All right. What's got you hot on the Golden arches here, Peter?
PETER SALEH: Good morning. Thanks for having me on. How are you?
BRAD SMITH: I'm well. I'm well. Happy holidays to you.
PETER SALEH: Happy holidays. OK. So let's talk about McDonald's here. What is the thesis that is really setting up this play going into 2024?
PETER SALEH: So look, I think McDonald's continues to take market share in the fast food hamburger segment. I think we have a buy rating $300 price target on the name. They're accelerating development, especially in the US. That is accelerating pretty significantly over the next several years. So they're putting more units into the ground. Their same store sales remain healthy. And look, we're not calling for a recession in 2024.
We think the economy is still pretty healthy. But this is a name that is fairly recession-resistant. And if there is any sort of consumer slowdown or consumer-led pullback, this is a name that performs particularly well, given its value proposition, also given its business model, highly franchised business across the globe and the largest restaurant company in the world. So I think this is a good play for going into 2024. Again, $300 price target on the name.
SEANA SMITH: So Peter, if you are expecting that a name like McDonald's here to outperform, what does that then tell us more broadly speaking about the restaurant sector? And who else is best positioned as you look ahead to 2024?
PETER SALEH: So yeah, I think 2024, at least we're going to start the year with a lot of discounts. We're already seeing that. And in that type of environment, McDonald's tends to take some share. But we also-- you know, one of our top picks for 2024 is Domino's. And I think that name has several specific catalysts for itself.
One, they changed their rewards program, which is driving significant engagement with less frequent customers. That changed in September. They're already seeing an acceleration in traffic and in same store sales. That happened in the fourth quarter. We think that continues into 2024. They also have the partnership, one of the last companies to partner with third party aggregators. They partnered with Uber Eats.
That is launching as we speak. And the advertising for that will start in early next year. And I think that is going to be a material driver of same store sales growth in 2024 for Domino's, taking them from a very low single digit type comp in the US to a mid-single digit. And I think in that environment, I think you get multiple expansion for this name going forward.
