- Options traders betting on another 9% drop in share price
- Total revenue could drop to $5.32bn
- Technical indicators pointing to more bad times ahead
Since reaching a high in January, McDonald’s Corp.’s stock price has dropped by well over 10%. Options traders are putting their money on the share price dropping by another 9% after the Q2 results are released on Thursday.
Although earnings growth is expected to reach 11.3%, total revenue is expected to drop by 12%. The technical charts for the stock continue to look lackluster and also hint that the stock price could drop further in the next few weeks.
Bets on the share prices dropping outnumber the bets that it will rise by a ratio of 8 to 1. Some options traders are betting the price will drop to $144.
The company’s total revenue has been falling steadily since September 2013, when it reached $7.3bn for the quarter. If revenue drops to $5.32bn in the latest results, it would mean a decline of 27% over the last five years.
Earnings, however, have increased and are expected to come in at $1.93 per share for Q2 2018. Since Q2 2016, profits have increased by nearly 33%, largely due to cost reductions.
The technical chart does not look good at this stage. If the price drops below the support level of $155.50, it might fall to $148.
The RSI has also been in a downtrend since reaching a recent high in November 2016. This points to the end of the bull run. Volume is also tapering off, which could point to a lack of prospective buyers.
After stagnating for close to six months, this week’s earnings report will probably be a make-or-break event for McDonald’s shares. Right now, the market seems to be sending a very clear message.
