Is Yum China Holdings, Inc. (YUMC) Among the Best Fast Food Stocks to Buy Now?
We recently compiled a list of the 12 Best Fast Food Stocks to Buy Now. In this article, we are going to take a look at where Yum China Holdings, Inc. (NYSE:YUMC) stands against the other fast food stocks.
Fast food stocks are businesses that run quick-service restaurants. These stocks can be a smart option to invest in the restaurant industry, which tends to perform well even during economic downturns due to its low costs and convenience. For example, the early COVID-19 pandemic was not favorable for the restaurant business overall, but fast-food chains that were able to offer curbside pickup, delivery, and drive-thru services performed better than their competitors that relied on dine-in. A challenging economic situation presents fewer risks because many fast-food restaurants prioritize providing great value.
As per a research report, the global fast food market has expanded gradually in recent years. It will grow at a compound annual growth rate (CAGR) of 2.9%, from $645.2 billion in 2024 to $663.92 billion in 2025. Changes in customer choices and lifestyles, rapid urbanization, globalization, greater demand for convenience meals, and an increase in the working population have all contributed to historic expansion. The fast-food market's largest region in 2024 was North America. Asia-Pacific is anticipated to be the fastest-growing region over the projection period.
Automation is changing the fast-food service business in the United States. Robotic systems and artificial intelligence tools are now reducing production times and increasing efficiency. Complex beverage preparation time has been reduced from 87 to just 36 seconds due to a new drink-making system. In the meantime, a dual-sided grill has sped up cooking by 70% in high-volume locations, and an avocado-processing robot reduces prep time by 50%. According to a National Restaurant Association research released in February 2023, 58% of restaurant operators anticipated that 2023 would see a rise in the usage of technology and automation to cope with labor shortages. In a May 2023 poll, HungerRush found that 36 percent of 1,000 Americans stated they believed that large restaurant chains lacked enough employees to process orders, make food, and deliver food.
Chief information officer Aaron Nilsson of Jet's Pizza, a franchise with locations in Michigan, introduced a phone bot driven by artificial intelligence to take orders for pizza. He stated:
'Now most consumers expect their local pizza place and their favorite coffee house to remember their last order, know what credit card they want to use, and make it quick and easy for them to complete an order. Society has moved on and automation is expected – even from the small-time operator.'
According to a 2024 LendingTree survey, 78% of Americans now consider fast food a luxury, with prices rising by more than 60% since 2014. Quick-service restaurants (QSRs) have been compelled by this change to reconsider what value is. Companies are prioritizing quality, convenience, and technology over price competition to defend higher prices. According to Savneet Singh, CEO of a significant restaurant technology business, the value today isn't just about price; it's about the entire experience. Moreover, technology is being used by businesses to improve this perceived value. AI-powered kiosks, drive-thru technology, and mobile ordering shorten wait times and customize service, while kitchen automation increases reliability. These days, loyalty programs use data analytics to provide hyper-personalized rewards, which boosts consumer engagement and encourages repeat visits.
However, affordability is still crucial. The expense of fast food has caused 62% of consumers to cut back on their purchases, which has led several businesses to bring back $5 meal offers, as per the LendingTree study. A combination of price, quality, convenience, and personalization is the new QSR value equation. QSRs have the potential to redefine luxury as intelligent, easily accessible service by utilizing technology and loyalty.
The iconic yellow and red roof of a franchise restaurant in the bustling streets of a city.
For this article, we sifted through the online rankings to form an initial list of the 20 Fast Food Stocks. From the resultant dataset, we chose 12 stocks with the highest number of hedge fund investors, using Insider Monkey's database of 1,009 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks. We have used the stock's revenue growth year-over-year as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Number of Hedge Fund Holders: 29
Yum China Holdings, Inc. (NYSE:YUMC) is China's biggest restaurant operator, with over 16,000 locations and system-wide sales of about $12 billion in 2024. It generates revenue from franchise fees and its own eateries. The firm, which separated from Yum Brands in October 2016, pays 3% of systemwide sales as a trademark licensee. It owns, operates, and franchises restaurants in China under the brand names KFC, Pizza Hut, and Taco Bell. It is among the Best Food Stocks.
The company gave $1.5 billion to shareholders in 2024, which included $1.24 billion in share buybacks and $248 million in dividends, lowering the number of outstanding shares by more than 31 million. The business concluded 2024 with $2.8 billion in net cash and $714 million in free cash flow. Given its excellent financial position, Yum China Holdings, Inc. (NYSE:YUMC) is boosting its quarterly dividend by 50% to $0.24 per share, pushing its payment ratio beyond 40% of expected 2024 diluted earnings per share.
Chen Luo, a BofA analyst, maintained his Buy recommendation on Yum China Holdings, Inc. (NYSE:YUMC)'s shares and increased his price objective from $57.50 to $60.50. The company adjusted its forecasts for same-store sales growth and margin, which resulted in only minor adjustments to EPS projections. Additionally, the company raised its target multiples in its blended valuation, which fueled its higher price objective. In a preview, the analyst informs investors that the company anticipates a 'solid' first quarter.
Overall, YUMC ranks 12th on our list of the 12 Best Fast Food Stocks to Buy Now. While we acknowledge the potential of Fast Food companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than YUMC but that trades at less than 5 times its earnings, check out our report about this .
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
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