McDonald’s Corp (MCD) shares took a significant tumble on Wednesday after the U.S. Centers for Disease Control (CDC) announced an E. coli outbreak linked to the fast-food chain’s iconic Quarter Pounder hamburgers. The news sent shockwaves through the market, prompting investors to sell off MCD shares.
The CDC reported 49 confirmed cases of E. coli across 10 states, with the first cases emerging in September and continuing into October. The outbreak has been linked to Quarter Pounder hamburgers, leading to at least 10 hospitalizations and one reported fatality.
The strain of E. coli, identified as O157:H7, is known for causing serious illness. It’s the same strain responsible for a deadly outbreak at Jack in the Box in 1993.
In response to the outbreak investigation, McDonald’s has pulled ingredients for Quarter Pounder hamburgers and temporarily stopped distributing slivered onions in affected areas. These measures are aimed at identifying the source of the contamination and ensuring the safety of its customers.
McDonald’s, in a statement, emphasized its commitment to customer safety, saying: “Across the McDonald’s System, serving customers safely in every single restaurant, each and every day, is our top priority and something we’ll never compromise on.”
Initial findings from the investigation point towards slivered onions used in the Quarter Pounder, sourced from a single supplier serving three distribution centers, as a potential cause.
Following the outbreak news, several analysts took action, downgrading McDonald’s stock and adjusting their price targets. Baird analyst David Tarantino downgraded the stock from Outperform to Neutral and lowered the price target from $320 to $290. Guggenheim analyst Gregory Francfort echoed this sentiment, downgrading McDonald’s from Buy to Neutral with a $285 price target. TD Cowen analyst Andrew Charles maintained a Hold rating with a $300 price target. While Wedbush analyst Nick Setyan reiterated an Outperform rating with a price target of $295.
By the time of publication, McDonald’s shares had fallen by 4.24%, trading at $301.33. The future of the stock remains uncertain, heavily dependent on the outcome of the ongoing investigation and the company’s response to the E. coli outbreak.
