On Friday, Loop Capital changed its rating on Domino's Pizza (NYSE:DPZ) shares from Hold to Buy, significantly increasing the price target to $559 from the previous $419. This adjustment comes as a result of recent checks with U.S. franchisees of the pizza chain, which revealed an uptick in same-store sales growth during the latter part of the fiscal fourth quarter.
The firm's decision is based on a 32x multiple of their 2025 earnings per share (EPS) estimate. After a sluggish beginning in the early fiscal fourth quarter, data from franchisee contacts indicates that same-store sales growth improved from 1.0-1.5% in the first 10 days to 2.5-3.0% in the subsequent 6-7 weeks.
Currently, same-store sales are approximately 2.5% quarter-to-date, which, while below Loop Capital's full-quarter expectation of 3.0% growth, is still ahead of the consensus estimate of 2.0%.
The report from Loop Capital also highlighted that on a two-year stacked basis, the 2.5% growth translates to a 5.1% gain. This is a notable increase when compared to Domino's reported two-year stacks of 2.3% in the third quarter of 2024. Moreover, the implied three-year stacks of 5.9% for the current quarter to date represent a slight acceleration from 4.5% in the previous quarter.
The upgrade reflects the analyst's confidence in the company's performance and its potential for continued growth in the near term. Domino's Pizza's stock rating improvement and price target raise are based on the latest franchisee sales data, providing a positive outlook for the company's fiscal fourth-quarter performance.
In other recent news, Domino's Pizza Enterprises, the largest franchise operator of the brand outside the U.S., reported a 1.2% decline in group same-store sales during the first 17 weeks of fiscal 2025.
Domino's Australia CEO, Don Meij, announced his resignation after more than 20 years of service, and Mark van Dyck, the Asia-Pacific managing director for the London-listed Compass Group (LON:CPG), will succeed him. Analysts from Jefferies view this change as a positive step for the company, allowing for necessary changes to restore growth.
Domino's Pizza Inc. also announced the appointment of Kate Trumbull as Executive Vice President and Chief Marketing Officer, effective November 1, 2024. Trumbull will lead the global marketing efforts and is expected to elevate the company's marketing strategies on a global scale.
Bernstein SocGen Group revised Domino's financial outlook, reducing the price target while maintaining a Market Perform rating due to concerns over U.S. delivery sales. Despite these challenges, Domino's Pizza's carryout segment's steady growth and the company's focus on value are expected to support its market share gains.
The company reported a 6.6% increase in U.S. retail sales and a 5.1% growth in global retail sales for Q3, marking its fourth consecutive quarter of same-store sales growth. Domino's also launched a new mac and cheese product as part of its ongoing value-focused initiatives. These are the recent developments in Domino's Pizza's business operations.
InvestingPro Insights
Building on Loop Capital's optimistic outlook for Domino's Pizza (NYSE:DPZ), recent data from InvestingPro offers additional context to the company's financial health and market position. Domino's boasts a market capitalization of $15.68 billion, reflecting its significant presence in the fast-food industry. The company's revenue growth of 4.41% over the last twelve months, coupled with a quarterly revenue growth of 5.14% in Q3 2024, aligns with the positive same-store sales trends noted by Loop Capital.
InvestingPro Tips highlight Domino's strong dividend history, having raised its dividend for 11 consecutive years and maintained payments for 13 years. This consistent dividend growth, currently yielding 1.35%, may appeal to income-focused investors. Additionally, Domino's profitability over the last twelve months and analysts' predictions for continued profitability this year support Loop Capital's bullish stance.
However, investors should note that Domino's is trading at a high P/E ratio of 28.45 (adjusted for the last twelve months), which is relatively high compared to its near-term earnings growth. This valuation metric suggests that the stock may be priced at a premium, which aligns with Loop Capital's significant price target increase.
For those seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Domino's Pizza, providing a deeper dive into the company's financial health and market position.
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