Goldman Sachs has reaffirmed its positive stance on Domino's Pizza shares (NYSE: NYSE:DPZ), maintaining a Buy rating and a price target of $515.00.
Domino's performance was noted to have lagged slightly behind expectations, with U.S. same-store sales growth (SSSG) at +3.0% compared to the anticipated 3.5%, and International SSSG at +0.8%, falling short of the +2.8% consensus. Despite these figures, the investment firm's outlook remains optimistic.
Domino's stock dipped 1.1% in contrast to the less pronounced declines of the S&P 500, which fell 0.2%, and its franchised fast-food peers, down by 0.9%. The slight underperformance in sales growth metrics came into focus against broader market movements.
Goldman Sachs' confidence in Domino's is underpinned by projections of robust growth over the next three years, with an expected 7.1% compound annual growth rate (CAGR) in sales and a 12.2% CAGR in earnings per share from 2023 to 2026. The firm's analysis suggests that Domino's will continue its dominance in the pizza industry, gaining market share from both direct pizza competitors and other fast-food entities.
In other recent news, Domino's Pizza has been the focus of several financial adjustments and ratings from various analyst firms. Wells Fargo, Stifel, and Barclays have all adjusted their price targets for Domino's shares, with Wells Fargo reducing its target to $420, Stifel to $470, and Barclays to $370. Despite these adjustments, all three firms maintained their respective ratings on the stock.
Domino's third-quarter results revealed a 3% increase in U.S. same-store sales, falling short of the projected 3.6% increase. Internationally, same-store sales growth stood at 0.8%, also missing the anticipated 2.9% growth. Consequently, Domino's revised its annual global retail sales growth forecast down to 6% from the previously expected 7%.
On a positive note, Domino's third-quarter earnings per share reached $4.19, surpassing the estimated $3.65. This was despite weaker-than-expected comparable store sales growth. Stephens maintained an Equal Weight rating, while RBC Capital initiated coverage with an Outperform rating.
In light of these developments, Domino's anticipates future growth to be driven by strategic value promotions and partnerships with third-party marketplaces like DoorDash (NASDAQ:DASH) and Uber (NYSE:UBER). The company is also banking on the launch of its EP 2.0 initiative to boost sales in the fourth quarter.
InvestingPro Insights
While Goldman Sachs maintains a bullish outlook on Domino's Pizza, recent InvestingPro data provides additional context to the company's financial position. Domino's boasts a market capitalization of $14.3 billion and a P/E ratio of 25.4, indicating investors' willingness to pay a premium for its shares. This aligns with Goldman Sachs' positive stance on the stock's potential.
InvestingPro Tips highlight Domino's strong dividend history, having raised its dividend for 11 consecutive years and maintained payments for 13 years. This demonstrates the company's commitment to shareholder returns, which could be attractive to income-focused investors. Additionally, Domino's liquid assets exceeding short-term obligations suggest a solid financial foundation, supporting Goldman's projection of continued growth.
However, it's worth noting that Domino's is trading at high EBITDA and revenue valuation multiples, which investors should consider alongside Goldman's optimistic price target. The company's revenue growth of 2.28% over the last twelve months and 7.14% in the most recent quarter aligns with Goldman's expectations of market share gains and industry dominance.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Domino's Pizza, providing a deeper dive into the company's financial health and market position.
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