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McDonald's to Ride Coffee, China to Rebound

Source: Reuters
15/06/2009

New York, June 14 - Shares of McDonald's Corp have lagged during the recent market recovery, but new specialty-coffee items, growth in China and a more stable dollar could combine to jump-start the fast food giant's stock, according to a report in Barron's financial newspaper.

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"The fast-growing, high-margin beverages turf can boost sales by 10 percent or more," the report said, quoting a Morgan Stanley analyst.

Concerns that an economic rebound will hurt sales of McDonald's Value Meals are unfounded, Barron's said in its latest edition.

Morgan Stanley believes the stock is worth $65 per share.

"But if the beverage roll-out and growth in China exceed expectations, the company could earn $4.42 a share in 2010 and trade at a super-sized 18-times multiple. That would peg shares at about $79," Barron's said.

McDonald's shares closed at $58.36 on the New York Stock Exchange on Friday.



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