McDonald's: Retiring the Tired 'Will It Recover?' Story

McDonald's Corporation (MCD) may not be Shake Shack Inc (SHAK), but that doesn't mean it's cratering

May 5, 2015 at 8:55 AM
facebook X logo linkedin


Here's a headline that's time has come: "McDonald's to Reveal ... Options Are on Table!" Finally! The Chicago Board Options Exchange (CBOE) invented equity options 40 years ago; now there are about 57 or so U.S options and not one of them lists McDonald's Corporation (NYSE:MCD) options? Hard to believe.

OK, my bad. I truncated the Bloomberg header, and channeled my inner Lionel Hutz on the punctuation. It's actually: "McDonald's to Reveal Comeback Recipe: What Options Are on Table?"

"Steve Easterbrook is preparing for his biggest moment as McDonald's Corp.'s new leader on Monday, when he unveils a much-anticipated plan to put the shine back on the Golden Arches.

The company veteran, who was elevated to chief executive officer in March, is confronting the chain's worst sales slump in more than a decade. And the challenges have been particularly pronounced in McDonald's home market. U.S. same-store sales dropped 2.1 percent last year, the biggest decline since at least 2000."

Ah yes, the never-ending "how can McDonald's ever recover" story. It's gone on as long as the Greek debt crisis -- or so it seems.

And as we all (hopefully) know, the burgers just don't compare too well to Shake Shack Inc (NYSE:SHAK), nor does the stock action. Here's how they look side-by-side over the last three months: 

150505agw1

But, alas, that's a pretty unfair comp. McDonald's is a bazillion-revenue, mature company, whereas Shake Shack is a fast-growing recent IPO. Change the comp to the S&P 500 Index (SPX), and McDonald's has basically performed in line with the market.

150505agw2

I wouldn't call that a thrilling chart there. But financial TV gives you the impression that this is a cratering stock, and that's hardly the case.

And MCD options have actually done reasonably well. Both realized vol and implied vol have perked up in 2015. Vol hovered in the mid-teens for the better part of 2014; now, it's more like a low- to mid-20s vol name.

What's more, there was actually an Apple Inc. (NASDAQ:AAPL)-esque bid up into the Monday announcement. The options board priced in a 3.5% move, with nary a McWatch on the horizon.

Look, MCD is not a terribly exciting option, nor is the stock itself so interesting. You can probably sell strangles here and wait them out and/or roll them and do fine. But it's just not the disaster zone they make it sound like, either.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI