By Mackenzie Tatananni

McDonald's risks falling out of favor with consumers as weight-loss drugs continue to gain traction in the U.S., Redburn Atlantic analysts argued Tuesday as they double-downgraded shares of the fast-food chain to Sell from Buy.

Analysts led by Chris Luyckx pointed to "new behavioral challenges," specifically the widespread adoption of glucagon-like peptide-1 drugs, which "are suppressing appetites and represent an underappreciated longer-term threat." While the threat appears manageable at a glance, "the impact is cumulative," Luyckx asserted. "A 1% drag today could easily build to 10% or more over time, particularly for brands skewed towards lower-income consumers or group occasions."

And that isn't all. Industry traffic remains weak, with consumers "showing clear signs of pricing fatigue after years of aggressive menu inflation," Luyckx continued. Renewed inflation fears, spurred on by the ever-changing tariff landscape, could constrain spending even further. "This scenario is increasingly plausible and relevant for brands with limited pricing power," Luyckx wrote.

Notably, the Redburn downgrade was the third for McDonald's in a matter of days. Loop Capital last Friday cut its rating to Hold from Buy and lowered its price target on the shares, citing negative customer reception to a new menu item. In a note Monday, Morgan Stanley analysts downgraded the stock to Equal Weight from Overweight and trimmed their target price due to concerns about its valuation.

Redburn also reduced the price target on McDonald's to $260 from $319. The shares fell 1.3% to $300.95 in premarket trading.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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June 10, 2025 09:16 ET (13:16 GMT)

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