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Jim Cramer Explains Why Twitter (TWTR), Yelp (YELP) Are Bad Shorts, McDonald's (MCD) Is a Yield Play

Stocks in this article: MCD

NEW YORK (TheStreet) -- TheStreet's Jim Cramer has used a downside target of $29 since Twitter  (TWTR) went public and the stock hit that level yesterday. Cramer no longer thinks the stock is a good short as more upgrades come in from analysts who thought Twitter was overvalued.

Twitter has an $18 billion market cap but the possibility of a takeover arises if it hits $13 billion or $14 billion. Cramer uses the same analysis for Yelp  (YELP), which has been cut in half. He says this is the time to stop shorting Yelp, which he calls a good company with a stock price that just went too high.

Cramer says McDonald's (MCD) is regarded as not doing well and the stock is not too high. He says people like dividends and he sees interest rates going to 2.2% or 2.3% rather than 2.8% because there are not a lot of high-quality bonds. Cramer calls McDonald's a yield play and, after taxes, the company does much better than a treasury and he believes its dividend will climb.

Must Watch: Jim Cramer: Stop Shorting Twitter, Yelp; McDonald's is a Yield Play

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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Separately, TheStreet Ratings team rates MCDONALD'S CORP as a "buy" with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate MCDONALD'S CORP (MCD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MCD's revenue growth has slightly outpaced the industry average of 4.0%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MCDONALD'S CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MCDONALD'S CORP increased its bottom line by earning $5.56 versus $5.36 in the prior year. This year, the market expects an improvement in earnings ($5.76 versus $5.56).
  • 37.55% is the gross profit margin for MCDONALD'S CORP which we consider to be strong. Regardless of MCD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCD's net profit margin of 17.98% compares favorably to the industry average.
  • The change in net income from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income has decreased by 5.1% when compared to the same quarter one year ago, dropping from $1,270.20 million to $1,204.80 million.
  • In its most recent trading session, MCD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • You can view the full analysis from the report here: MCD Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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