McDonald's started with a Buy rating at HSBC: 4 big analyst picks

Investing.com — Here is your Pro Recap of the biggest analyst picks you may have missed today: a Buy initiation at McDonald's, and upgrades at Discover Financial, Spirit AeroSystems, and Paramount Global.

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McDonald's started with Buy at HSBC

HSBC initiated coverage on McDonald’s (NYSE:MCD) with a Buy rating and a price target of $317.00, as reported in real-time on InvestingPro.

The price target indicates an approximate 9% upside, based on a 2024 estimated PE multiple of 25.0x. This is a 9% premium over the company's three-year average before the pandemic, supported by its strong franchise model, higher earnings growth, and improved operational efficiency.

According to the analysts, the earnings growth from 2022 to 2025 is expected to be significantly higher than the average from 2016 to 2019, with an increase in operating margin and free cash flow growth over the same period.

Discover Financial earns an upgrade at Citi

Discover Financial Services (NYSE:DFS) shares rose nearly 1% pre-market today after Citi upgraded the company to Buy from Neutral and raised its price target to $133.00 from $93.00.

The analysts explained that the upgrade is due to several anticipated catalysts in the next year. These include the reinstatement of regular share repurchases, the sale of its student loan portfolio/business, an expected peak in credit losses in 2024, and reduced expense pressure from business simplification.

Despite a 24% increase in shares over the past month, they are still 13% below their 52-week high, and there's potential for multiple expansion as credit and regulatory concerns diminish.

Two more upgrades

Morgan Stanley upgraded Spirit Aerosystems (NYSE:SPR) to Equalweight from Underweight and raised its price target to $35.00 from $22.00. Shares rose more than 1% pre-market today.

The analysts noted the rating change is due to the incorporation of recent capital raises and a change in market sentiment. The revision also takes into account updated margin expectations, reevaluating Spirit AeroSystems' Master Operating Agreement with Boeing (NYSE:BA) and recognizing improved performance since Patrick Shanahan became CEO.

We previously were Underweight the stock given the state of SPR’s highly levered balance sheet, poor execution, negative FCF generation, and risks associated with the company’s impending $1.2bn debt that was scheduled to mature in 2025. The company has now refinanced its 2025 $1.2bn debt stack and secured additional capital through fundraising for ~$200mn of convertible debt and ~$200mn of common equity.

Paramount Global (NASDAQ:PARA) shares rose more than 1% pre-market today after Wells Fargo upgraded the company to Equal Weight from Underweight and raised its price target to $18.00 from $15.00.

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