McDonald’s vs Starbucks: Stephanie Link weighs in

By:
on Dec 7, 2021
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  • Hightower's Stephanie Link picks McDonald's over Starbucks Corporation.
  • MKM Partners' Brett Levy upgraded Starbucks to "buy" with a PT of $130.
  • McDonald's stock is up 23% year-to-date versus Starbucks at about 12%.

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McDonald’s Corp (NYSE: MCD) is up 23% in the stock market this year versus Starbucks Corporation (NASDAQ: SBUX) at about 12%. But Hightower’s Stephanie Link is convinced the burger company is still a better pick than the coffee chain.

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Link agreed that McDonald’s is not cheap at current levels but said Starbucks was even more expensive. Making her case for MCD on CNBC’s “Halftime Report”, she said:

McDonald’s trading at 27 times versus Starbucks at 34 times. McDonald’s has done a really good job in terms of execution, menu simplification, drive-thru, digital, delivery options. It acts like a consumer staples stock. I like the steadiness that offsets some of the cyclicality that I have in my fund.

Other reasons she likes McDonald’s include $4.3 billion in cash that recently prompted the company to reinstate its dividend and buyback programme. It partnered with IBM to automate its drive-thru lanes in October.

MKM Partners’ Brett Levy disagrees

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Link’s outlook, however, differs greatly from Brett Levy. The MKM Partners’ analyst on Tuesday upgraded Starbucks to “buy” and raised his price target to $130 that represents an about 15% upside from where the stock closed on Monday.

Previously, Levy had a PT of $115 on SBUX. Starbucks is down nearly 10% from its year-to-date high in July, which he sees as a buying opportunity.

In late October, Starbucks said it will spend $1.0 billion to offer better wages to partners and a better overall experience to customers. The investment, Levy agreed, could weigh on fundamentals in the short-term but positions Starbucks well to emerge as a long-term winner.

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