On Thursday, Stifel, a financial services firm, revised its stock price target for Domino's Pizza (NYSE:DPZ), reducing it to $480 from the previous target of $565. Despite the adjustment, the firm maintains a Buy rating on the stock.
The reevaluation follows Domino's announcement that it has withdrawn its long-term unit growth forecast, which was updated just seven months ago. Moreover, the company's U.S. same-store sales (SRS) grew 4.8%, falling short of the anticipated 5.5%.
The analyst from Stifel noted that Domino's shares are experiencing downward pressure for several reasons. One of the primary concerns cited is the suspension of the company's long-term unit growth guidance. Furthermore, there's unease about the sustainability of the SRS benefits into 2025, and visibility into international development is currently limited, which is causing frustration among investors.
Despite these challenges, the analyst believes that the company's U.S. performance remains robust, citing transaction-driven same-store sales that are expected to lead the segment. Additionally, the average U.S. Domino's store has seen year-over-year growth in dollar profits, with projections indicating that each store could generate over $170,000 in EBITDA.
The firm has also adjusted its projections for international development in 2025, taking a more conservative stance due to specific issues in markets like Japan and France. However, the analyst suggests that this conservative forecast could be revised if the situation improves and the issues remain localized.
In conclusion, Stifel remains optimistic about Domino's Pizza's sales-building strategies and views the current dip in share price as an opportunity for investors to buy. The firm's confidence is reflected in the maintained Buy rating, despite the lowered price target.
In other recent news, Domino's Pizza Inc. reported Q2 sales slightly below expectations with a growth of 4.8% compared to the anticipated 4.91%, suggesting cautious spending patterns by U.S. consumers.
Despite this, the pizza chain exceeded profit expectations, earning $4.03 per share against the predicted $3.68. Domino's also reported a Q2 revenue of $1.10 billion, aligning with market estimates.
In parallel, Domino's Pizza Enterprises announced store closures in Japan and France following a flat growth forecast. Analysts from Macquarie and UBS indicated this move could result in a near-term negative impact on earnings but expect a return to positive same-store sales by the financial year 2025. Morgan Stanley and Macquarie have adjusted their earnings estimates downwards following these developments.
Loop Capital maintained its Hold rating on Domino's Pizza, while Baird upgraded the shares from Neutral to Outperform and increased its price target to $580. The firms cited strong business strategies and market positioning as reasons for their assessments.
Despite these varying perspectives, all recent developments indicate that Domino's continues to adapt and strategize in response to market conditions.
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