McDonald's Q4 Strength Obscures Imminent Subsidy Cliff, Analysts Urge Caution

What happened

McDonald's reported robust Q4 2025 earnings, with accelerated comparable store growth driven by its value proposition and store count increases, as highlighted in a recent MarketBeat article. However, the DeepValue master report reveals that this performance was partially subsidized by corporate funding for Extra Value Meals, which is set to end after Q1 2026. Despite the article's optimistic tone, filings show that recent U.S. comparable sales growth has been primarily check-driven, not from increased guest traffic, indicating underlying fragility. This discrepancy raises critical questions about the sustainability of growth once franchisees must fully fund value promotions without corporate support. Investors should look beyond the propaganda and recognize that the upcoming quarters will test the durability of McDonald's strategy in a promotion-heavy market.

Implication

The end of corporate subsidies for Extra Value Meals in Q1 2026 shifts the financial burden to franchisees, potentially leading to reduced discount depth and weaker guest counts if economics falter. High valuations at 27.4x P/E and 20.4x EV/EBITDA offer little margin of safety if franchisee-funded value fails to sustain traffic, risking earnings declines and stock downside. Monitoring Q2 2026 results for positive U.S. guest counts with stable ~15% discounting is crucial to validate the investment thesis and avoid downside from a crowded narrative. Until then, the WAIT rating is justified, with re-assessment in 3-6 months based on evidence of franchisee alignment and traffic-led comps. Any deviation, such as check-driven growth or franchisee pullback, would signal exit opportunities to protect capital in a volatile environment.

Thesis delta

The new article confirms recent growth but does not alter the core thesis that McDonald's faces a critical durability test in Q2 2026 when corporate support ends. It highlights the propaganda in portraying growth as sustainable, while the DeepValue report underscores underlying risks from check-driven comps and franchisee economics. Therefore, the investment call remains WAIT, with increased vigilance on post-subsidy traffic and margin metrics.