An E.Coli breakout at McDonald’s has cost the company over $12billion (£9billion) – or the equivalent of 1.8 billion Quarter Pounders.
The popular fast-food chain’s overall value dived 7% overnight with its market cap plummeting from $225billion at close on Tuesday, to $212billion today.
The US Centers for Disease Control and Prevention (CDC) has reported 49 cases across 10 states, resulting in 10 hospitalisations and one death, while the exact source of the contamination is unknown the CDC said silvered onions are a ‘likely source’.
Charu Chanana, Chief Investment Strategist at Investment Platform Saxo warned that the company could face pressure across its revenue as they try to fix the issue.
Charu also compared the outbreak to Chipotle’s E.coli outbreak in 2015 which saw stocks plummet over 45% the following three months and saw the company struggle for several years after as they worked to regain trust.
In the US Quarter Pounders cost around $6.39 each, meaning the company has lost the equivalent of 1.8 billion of one of their most popular products.
Charu Chanana, Chief Investment Strategist at Investment Platform Saxo said: “The Quarter Pounder, alongside the Big Mac, is a major revenue generator for McDonald’s, with reports suggesting that these classic items account for about 70% of food sales in top markets.
“Food safety concerns are key for restaurant operators. As McDonald’s grapples with this unfolding crisis, its revenues, earnings and stock price could face pressure. While the initial drop may tempt some investors, there could be room for further downside in case the number of cases continue to rise and spread to other states.
“Stocks closed at $315 on Tuesday ahead of the reports and key support for the stock comes in.
“McDonald’s situation is reminiscent of Chipotle’s E. coli outbreak in late 2015, which severely impacted the chain’s sales and reputation for years. Chipotle’s issues began in October 2015, but the company continued to struggle for 2-3 years as consumer confidence took time to rebound. During the crisis, Chipotle’s stock plummeted by over 45% over a period of next several months, and recovery took a long time as they implemented new safety measures and worked to rebuild trust.
“McDonald’s situation could be somewhat different to Chipotle back in 2015. The latter did not use a centralized kitchen model, while McDonald’s has already responded saying that they have identified the problem to be with a single supplier that serves three distribution centres.”
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