On Wednesday, Jefferies analyst Alexander Slagle adjusted the price target for Papa John's (NASDAQ:PZZA) shares, bringing it down from $55.00 to $42.00, while retaining a Hold rating on the stock. The adjustment comes as Papa John's shares trade near their 52-week low of $36.25, having declined over 45% in the past year.
Slagle's analysis highlights that Papa John's preannounced domestic same-store sales (SSS) aligned with expectations, noting a quarter-over-quarter improvement in traffic. This uptick is attributed to early positive responses to the company's recent strategic moves, which include enhancements to their rewards program and mobile app, menu innovations, and marketing efforts.
The analyst also pointed out that international same-store sales increased by 2%, a result that was better than anticipated, particularly with improvements in the Middle East. Additionally, the company experienced stronger than expected unit growth, driven by a lower number of store closures than previously projected. This expansion contributes to Papa John's robust revenue base of $2.1 billion over the last twelve months, according to InvestingPro data. This aspect of Papa John's performance, according to Slagle, warrants further evaluation.
Papa John's has been focusing on expanding its digital and marketing capabilities in an effort to drive growth amidst a competitive fast-food landscape. The company's initiatives seem to be resonating with customers, as indicated by the reported quarter-over-quarter traffic improvements.
The international segment's performance, especially the 2% rise in same-store sales, suggests that Papa John's is gaining traction in overseas markets. This is particularly noteworthy in regions like the Middle East, where the company is experiencing a positive shift.
The reduced number of store closures has contributed to the company's unit growth, which has exceeded expectations. This development is significant for Papa John's as it reflects on the brand's stability and potential for expansion, despite the broader challenges faced by the restaurant industry.
In summary, while the reduced price target from Jefferies reflects a more cautious valuation of Papa John's shares, the Hold rating indicates that the firm acknowledges the company's operational improvements and potential for sustained performance based on its recent initiatives.
InvestingPro analysis suggests the stock is currently undervalued, with additional metrics showing a healthy 4.88% dividend yield and a track record of 12 consecutive years of dividend payments. For deeper insights into Papa John's valuation and 8 more exclusive ProTips, check out the comprehensive Pro Research Report, available with an InvestingPro subscription.
In other recent news, Papa John's International (NASDAQ:PZZA), Inc. reported a global system-wide sales dip of approximately 8% for the fourth quarter of the fiscal year, with a 4% decline in comparable sales in North America. Despite these figures, the pizza chain opened its 6,000th store during the fiscal year and added a total of 122 new restaurants in the fourth quarter.
Analyst firms have offered varied assessments of the company's performance and outlook. Stephens maintained its Overweight rating, expressing confidence in the new CEO's growth strategy, while Deutsche Bank (ETR:DBKGn) maintained a Hold rating due to a cautious growth outlook. BTIG held a neutral stance due to concerns over franchisee health and long-standing structural challenges, and KeyBanc downgraded Papa John's due to concerns about the company's path to recovery. The company plans to open over 100 new restaurants in North America and expects international openings to exceed 170.
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