Borislav Tonev

McDonald's Corporation (NYSE:MCD) Is Not Loving Brexit

by Borislav Tonev June 28, 2016

McDonald's Corporation (NYSE:MCD, MCD message board) started last week on the wrong foot after a few analysts lowered their price targets for the stock due to the fact that according to them, customers are spending less and the competitors have better promotional policies. Needless to say, investors reacted to the warnings immediately.

The volumes were higher than usual and MCD slowly but surely sank to just over $121 per share. Then, Brexit came along and it made things a whole lot worse. On Friday, MCD fell below the $120 mark when people realized that Britain will no longer be part of the European Union. The drop was extended yesterday when in a matter of six and a half hours, McDonald's stock wiped out about 2.6% of its value and ended up closing the day with a price of $116.30 – a new 3-month low.

MCD is just one of the many stocks that have been affected by the wide sell-off in the wake of Brexit. But how much time will it need to recover?

Some people reckon that the effects of UK's decision to leave the EU will be particularly painful for McDonald's. Apparently, about 37% of the company's revenues come from Europe and around 9% of its sales are generated in the UK. The fact that Britain will no longer be a member of the EU might have an impact on, among other things, the profit margins which is why more analysts downgraded the stock yesterday, putting additional pressure on MCD.

Despite the gloom and doom talk, certain individuals aren't that worried. A few articles have popped up saying that UK's volatile political climate won't really affect MCD that much. Some columnists even went as far as putting McDonald's on a list of “Brexit-proof” stocks.

MCD is clearly polarizing opinions which doesn't really make investors' lives any easier. Couple this with the markets' overall volatility, and you'll see that making an investment decision at this point in time isn't the easiest thing in the world. Make sure you don't rush it.

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