McDonald's Hits All-Time High After Replacing Cashiers with Kiosks

Thanks, minimum wage activists.

This week, McDonald's shares hit an all-time high after the company announced that it will be replacing cashiers with kiosks in 2,500 restaurants later this year. Cowen raised its rating because the technology upgrades will likely increase revenue. NBC reports:

McDonald's shares rallied 26 percent this year through Monday compared to the S&P 500's 10 percent return.

Andrew Charles from Cowen cited plans for the restaurant chain to roll out mobile ordering across 14,000 U.S. locations by the end of 2017. The technology upgrades, part of what McDonald's calls "Experience of the Future," includes digital ordering kiosks that will be offered in 2,500 restaurants by the end of the year and table delivery.

"MCD is cultivating a digital platform through mobile ordering and Experience of the Future (EOTF), an in-store technological overhaul most conspicuous through kiosk ordering and table delivery," Charles wrote in a note to clients Tuesday. "Our analysis suggests efforts should bear fruit in 2018 with a combined 130 bps [basis points] contribution to U.S. comps [comparable sales]."

He raised his 2018 U.S. same store sales growth estimate for the fast-food chain to 3 percent from 2 percent. 

The analyst raised his price target for McDonald's to $180 from $142, representing 17.5 percent upside from Monday's close. He also raised his 2018 earnings-per-share forecast to $6.87 from $6.71 versus the Wall Street consensus of $6.83.

"MCD has done a great job launching popular innovations within the context of simplifying the menu, while introducing more effective value initiatives that have recently begun to improve the brand's value perceptions," he wrote.

So why did McDonald's go in this direction? According to Forbes, there's a pretty easy explanation. "The push for a $15 starter wage has negatively impacted the career prospects of employees who were just getting started in the workforce while extinguishing the businesses that employed them," wrote Ed Rensi. "I wish it were not so. But it’s important to document these consequences, lest policymakers elsewhere decide that the $15 movement is worth embracing." Here's more:

Let’s start with automation. In 2013, when the Fight for $15 was still in its growth stage, I and others warned that union demands for a much higher minimum wage would force businesses with small profit margins to replace full-service employees with costly investments in self-service alternatives. At the time, labor groups accused business owners of crying wolf. It turns out the wolf was real.

Watch more on this development here:

Image Credit: Eat This

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