Is McDonald's Stock a Buy, Sell, or Hold in 2025?

If you've ever faced the frustration of finding the ice cream machine out of order at McDonald's (NYSE: MCD), you'll understand the headache investors holding the company's stock faced in 2024. Disappointing growth and weak earnings have kept shares in a tight trading range, down about 1% over the past year, while sharply underperforming the broader market.

Has this restaurant giant known for its iconic Golden Arches lost some of its luster, or are there reasons for investors in 2025 to start lovin' McDonald's again?

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Let's discuss what to do with the stock now.

The case to buy or hold McDonald's stock now

With more than 40,000 restaurant locations in over 100 countries, McDonald's is one of the most recognizable consumer brands worldwide. The fast-food pioneer has found success by not only building a reputation for serving quality meals at an affordable price, but also delivering spectacular shareholder returns over its storied history. Indeed, the stock is up 293% in the past 10 years.

That being said, the recent share price weakness reflects some underwhelming financial trends, at least in comparison to a stronger 2023. With results through the first nine months of 2024 for the period ended Sept. 30, total revenue was up just 2% year over year, as adjusted earnings per share (EPS) declined by -1%. Some ongoing cost pressures have impacted operating margins while the muted top line reflects a drop in international market comparable sales, outweighing a 0.3% growth in the U.S. during the last quarter.

Favorably, there is an expectation for an improvement in these headline numbers based on McDonald's "Accelerating the Arches" strategy. The effort focuses on refreshed marketing to boost brand appeal and customer engagement while maintaining the quality of core menu items.

Additionally, the plan doubles down on McDonald's "4Ds" of success, all aimed at propelling sustainable growth: digital capabilities, drive-thru operations, delivery options, and development of new markets.

Image source: Getty Images.

According to Wall Street consensus, 2025 is poised to mark a growth rebound for McDonald's, with projections showing a 3.8% increase in revenue as adjusted EPS strengthens by 6.8% to reach $12.61.

Ultimately, investors confident in the company's ability to reclaim its long-term growth trajectory and deliver higher earnings have a great reason to buy and hold the stock for the long run.

Data source: Yahoo Finance. YOY = year over year.

The case to sell McDonald's stock now

It's difficult to envision a world without McDonald's, considering how the restaurant chain serves as both a regular dining staple and an occasional indulgence for millions of loyal customers worldwide. By all indications, the business has all the pieces in place to thrive for many decades to come. Still, when considering a stock as an investment, it's important to examine it critically and think about what could go wrong.

One challenge for McDonald's over the next several years will be to maintain and consolidate its market share in what is an intensely competitive industry landscape. Consumers today have more options than ever in the quick-service restaurant category, including new concepts capitalizing on the demand for healthier food options.

Another consideration is McDonald's valuation, with shares trading around 25 times its 2024 consensus EPS as a forward price-to-earnings (P/E) ratio. This level nearly matches the 10-year average for the company's earnings multiple, suggesting the stock is fairly valued by the market. The concern is that given the modest growth outlook in the low-single-digit range, it's unclear whether McDonald's stock deserves a larger earnings premium in the current environment.

Investors who believe McDonald's is past its peak growth and will struggle to remain relevant next to higher-growth industry peers like Chipotle or emerging players such as Cava Group and Sweetgreen could consider moving on from the stock now.

MCD PE Ratio (Forward) data by YCharts

The decision: A wait-and-see approach makes sense

I also believe the next few quarters will be critical for McDonald's to demonstrate it can get back on track with stronger financial results. The market will be watching closely for improved comparable sales data and a recovery in the international business as key monitoring points.

Given the recent weakness and lingering uncertainties, a wait-and-see approach makes sense until 2025 trends become clearer. While longtime shareholders can likely continue holding their positions, investors might find more compelling opportunities elsewhere in the stock market.

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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.