In a research note to investors, Guggenheim analyst Matthew DiFrisco upgraded McDonald’s (MCD ) to Buy as he believes the shares valuation discount to large-cap peers has widened to an “unjustifiable” level given his outlook for stable to improving same-store sales and greater free cash flow generation.

BUY MCDONALD’S: Guggenheim’s DiFrisco upgraded McDonald’s to Buy from Neutral, with a $200 price target, arguing that its valuation discount to large-cap peers has widened to an “unjustifiable level” given his outlook for stable to improving same-store sales and greater free cash flow generation. The analyst told investors that he expects the U.S. same-store sales to see the current “Experience of the Future” initiative, or EOTF, drag reverse and become a net tailwind as early as the second half of 2019. In addition, DiFrisco said he sees the opportunity for management to improve the effectiveness of both marketing spend and the value messaging in the second half of 2018. McDonald’s currently has EOTF deployed in about one-third of the restaurants globally, with half of the U.S. restaurants expected to be deployed by the end of 2018, he pointed out, adding that the company defines the store investment in EOTF as adding modernization and technology in order to transform the restaurant service experience and enhance the brand in the eyes of the average customer.

The analyst argued that the shared EOTF investment with franchisees should help further McDonald’s global leadership atop the fast food category as digital mobile ordering continues to redefine convenience and personalization for the consumer. Beyond the physical store redesign element, DiFrisco expects the brand’s approach to marketing and connectivity with its core consumer to be the next meaningful driver to superior same-store sales. Additionally, the analyst noted that he anticipates the valuation gap between McDonald’s and its high franchise, large-cap peers will narrow in the quarters ahead. Over the last 4 years, the company has improved its franchise mix to 93%, up from 81.5% and is on track to achieve its long-term 95% target, which would put it more in line with the 97%-plus shared by both Domino’s Pizza (DPZ) and Yum! Brands (YUM). Lastly, the analyst pointed out that in recent history, McDonald’s Global System sales have outpaced Yum! Brands and are coming closer to Domino’s Pizza.