On Friday, Evercore ISI maintained its Outperform rating on Domino's Pizza (NYSE:DPZ) with a steady price target of $480.00. The firm highlighted the importance of the company's performance in the fourth quarter, noting that same-store sales (SSS) trends began modestly with nearly flat year-over-year results. Despite the challenging comparisons throughout the quarter, Domino's is expected to roll out a significant marketing campaign, including an updated Emergency Pizza "2.0".
The company's success in achieving a 2% or higher SSS in the fourth quarter would indicate a strong finish to the year and could demonstrate Domino's ability to sustain SSS growth into 2026. This would be particularly relevant as the impact of additional third-party delivery app marketing is anticipated to wane.
Evercore ISI's price target of $480 implies a valuation of 24 times the firm's estimated earnings per share (EPS) for 2026. This valuation is on the lower end of Domino's 10-year range, which varies from 22 to 35 times EPS, and sits slightly above its competitors YUM Brands and McDonald's (NYSE:MCD).
The target valuation is supported by the firm's outlook for Domino's, which includes expectations of more than 5% growth in global units, 7% increase in global retail sales, 8% rise in operating income, and double-digit EPS growth.
In conjunction with this assessment, Evercore ISI has removed Domino's Pizza from its Tactical Underperform (TAP) List, signaling a positive shift in the firm's short-term outlook for the company's stock performance.
In other recent news, Domino's Pizza reported its third-quarter earnings per share at $4.19, exceeding the estimated $3.65, despite a weaker-than-expected growth in comparable store sales. The pizza giant saw a 3% increase in U.S. same-store sales, falling short of the projected 3.6% increase. Internationally, the growth stood at 0.8%, also missing the anticipated 2.9%.
Various analyst firms have adjusted their price targets for Domino's shares. Citi revised its price target to $440, Goldman Sachs maintained a Buy rating with a price target of $515, and Wells Fargo reduced its target to $420. Stifel and Barclays also adjusted their targets to $470 and $370, respectively.
These adjustments follow recent developments in the company's performance, such as the integration of Door Dash as an additional third-party delivery platform, expected to begin as early as the second quarter of 2025. Additionally, Domino's anticipates future growth to be driven by strategic value promotions and partnerships with third-party marketplaces like Uber (NYSE:UBER). Despite these strategic moves, the company revised its annual global retail sales growth forecast down to 6% from the previously expected 7%.
InvestingPro Insights
Domino's Pizza's financial health and market position align with Evercore ISI's optimistic outlook. According to InvestingPro data, the company's revenue growth of 7.14% in the most recent quarter supports the analyst's expectations of continued growth. Additionally, Domino's has demonstrated strong profitability, with a robust operating income margin of 18.5% over the last twelve months.
InvestingPro Tips highlight Domino's commitment to shareholder returns, noting that the company has raised its dividend for 11 consecutive years and maintained payments for 13 years. This track record of consistent dividend growth, coupled with a current dividend yield of 1.48%, underscores the company's financial stability and aligns with Evercore's positive long-term outlook.
While Evercore ISI's price target of $480 implies significant upside potential, it's worth noting that InvestingPro's fair value estimate stands at $398.37, suggesting a more conservative valuation. Investors seeking a deeper understanding of Domino's financial prospects can explore 6 additional InvestingPro Tips available on the platform.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.