McDonald’s mobile ordering bet could pay off big
McDonald’s CEO: We are modernizing your burger experience
Mobile ordering is coming to McDonald’s later this year and Wall Street is ba-da-ba-ba-ba lovin’ it.
Shares of Mickey D’s hit an all-time high on Friday. McDonald’s (MCD) stock is now up nearly 10% this year.
McDonald’s has enjoyed an amazing comeback since CEO Steve Easterbrook took over in March 2015. He moved quickly to revamp the company’s menu and focus more on technology, such as self-ordering kiosks.
The changes quickly paid off, with McDonald’s reporting solid sales gains for much of 2015 and 2016.
Sales have started to cool off a bit in the U.S. recently though, but investors don’t seem that alarmed. The company’s sales are still sizzling in many overseas markets. And all the talk about mobile ordering has analysts excited.
McDonald’s USA president Chris Kempczinski told investors in March that the company planned to have mobile ordering and curbside pick-up options available in all of its U.S. restaurants by the fourth quarter.
The company is also testing a delivery service in Florida markets via mobile ordering with UberEats — the ridesharing giant’s GrubHub/Seamless (GRUB) competitor.
Two analysts upgraded McDonald’s stock this week, largely due to rising expectations about the company’s mobile push. Several other analysts raised their price targets on the stock as well.
Jeffrey Farmer of Wells Fargo Securities lifted his rating on McDonald’s to an "outperform" — essentially a buy — because he thinks McDonald’s has a leg up on its burger rivals in mobile.
"Restaurant consumers are aggressively gravitating toward concepts that offer the greatest level of convenience and control across ordering, payment and distribution," he wrote.
Bernstein’s Sara Senatore — who also boosted her rating on McDonald’s to an "outperform" — said that it was smart for McDonald’s to embrace mobile ordering, just as other restaurant chains like Panera (PNRA), Domino’s (DPZ) and Starbucks (SBUX) have.
Senatore did note that Starbucks has had some problems dealing with higher demand for beverages from consumers using the mobile app.
Starbucks even said in its last earnings report that long lines for drinks were scaring off customers who hadn’t placed orders in advance. But Senatore argued that’s a good problem to have — and McDonald’s can learn from Starbucks’ growing pains.
She added that digital ordering will also help McDonald’s because it "allows for greater customization while improving order accuracy and enhancing the customer experience."
Another analyst, Instinet’s Mark Kalinowski, thinks that mobile could be a big win for McDonald’s as well. Kalinowski surveys McDonald’s franchisees as part of his research and found that many are excited about joining the mobile revolution.
"There’s no doubt we need to be part of the smartphone generation," said one franchisee that Kalinowski surveyed.
Another said that "younger customers avoid quick-service restaurants due to lack of technology and they don’t like dealing with people so the app will help."
So McDonald’s clearly has a lot riding on the launch of its mobile ordering app. If technology winds up being the company’s new "special sauce," then Big Mac lovers — and investors — may continue to flock to the Golden Arches.