McDonald’s shares pop after Morgan Stanley upgrade

McDonald’s shares rose Thursday in early session trading, up nearly 2 percent, after investment bank Morgan Stanley said it sees a bright future for the burger chain.

In a note to investors Thursday, Morgan Stanley’s John Glass upgraded the fast-food chain’s stock to Overweight from Equal Weight, saying the firm is “buying the McDonald’s of the future today.” It also raised its price target on the shares from $210 a share from $173 a share.

Ticker Security Last Change Change %
MCD MCDONALD'S CORP. 287.84 +2.67 +0.94%

"We are endorsing the notion that McDonald's massive store modernization efforts, first rolled out in select international markets and now in the US (its single largest market), will begin to pay off in '19 and should produce best in class sales results for more years to come," Glass wrote.

He also added that its stock is a key “defensive” one during periods of economic slowing, noting that McDonald’s shares have outperformed the market 60 percent of the time when the S&P 1500 is on the decline.

While McDonald’s recently topped its earnings estimates in its quarterly report released last month, posting a same-stores sales increase of 2.4 percent at U.S. locations, it is still facing tough competition from other fast-food rivals and a shift in consumer tastes to healthier foods.

In August, the company announced plans to invest $69 million in 100 of the more than 179 stores in Arkansas by 2019, which is part of its overall $6 billion plan to modernize a majority of its U.S. restaurants by 2020.