Gold prices just lower; monthly gains on track
On Tuesday, Bernstein SocGen Group maintained its Market Perform rating on Domino’s Pizza (NASDAQ:DPZ) with a price target of $440.00. According to InvestingPro data, the stock currently trades at $462.07, with a P/E ratio of 27.54, reflecting premium valuations relative to near-term earnings growth potential. Analyst Danilo Gargiulo highlighted the company’s ability to gain market share and maintain cost discipline despite the ongoing challenges in the quick-service restaurant (QSR) pizza category. Gargiulo noted that Domino’s earnings confirm the company’s effective management and control over its operations, which is crucial for long-term profit growth. This is reflected in the company’s solid revenue growth of 5.07% and an impressive return on assets of 34.24% over the last twelve months. InvestingPro analysis shows the company maintains a "GOOD" overall financial health score, supported by strong profitability metrics.
The analyst pointed out that while the guidance for retail sales and unit growth falls below the long-term algorithm for 2025 and 2026, and franchisees’ profitability is slightly lower than the forecasted $170,000 for FY24, Domino’s is still on track with its profit growth algorithm. The decrease in the core delivery business, excluding UberEats, by 4.7% is also a concern for some investors, suggesting long-lasting business challenges.
Gargiulo also mentioned that some investors, referred to as bears, may express concerns over the lower guidance, potential risks from partnering with more delivery aggregators, and uncertainties in international growth. Conversely, optimists, or bulls, might view the conservative guidance as a way to reduce risks for the stock and anticipate a positive impact from the upcoming launch of stuffed crust pizza in March and potential new partnerships with delivery services.
The partnership with additional aggregators is seen as a potential catalyst for the company through 2026. Bulls are also likely to focus on Domino’s cost discipline and scale, which could safeguard the company’s bottom line in the event of sales declines.
In conclusion, while moderating sales growth expectations due to the bleak outlook and macroeconomic pressures, Bernstein has largely retained its earnings per share (EPS) expectations for Domino’s Pizza. The company has demonstrated its commitment to shareholder returns, having raised its dividend for 11 consecutive years, with a current dividend yield of 1.33%. For deeper insights into Domino’s Pizza’s valuation and growth prospects, InvestingPro subscribers can access comprehensive analysis and 8 additional ProTips that provide valuable context for investment decisions.
In other recent news, Domino’s Pizza has been the focus of several analyst reports following its fourth-quarter earnings announcement. The company reported an earnings per share (EPS) of $4.89, aligning with consensus expectations, although slightly below some individual forecasts. BMO Capital Markets responded by raising its price target to $515, maintaining an Outperform rating, citing confidence in Domino’s ability to capture market share despite a challenging consumer environment. Meanwhile, Loop Capital adjusted its price target to $555, maintaining a Buy rating, noting mixed results with domestic same-store sales falling short but international sales exceeding expectations.
Evercore ISI also reaffirmed its Outperform rating with a $480 price target, highlighting potential for strong same-store sales growth in the latter half of 2025 due to new marketing strategies and product offerings. Morgan Stanley (NYSE:MS) maintained an Overweight rating with a $496 target, emphasizing Domino’s strategic plans to expand aggregator platforms and its projection of 3% U.S. same-store sales growth. RBC Capital Markets continued to hold an Outperform rating, despite acknowledging softer guidance for 2025, and expressed confidence in the company’s ability to navigate current challenges.
Domino’s Pizza’s guidance for 2025 includes consistent global retail sales growth and an anticipated 8% increase in operating profit, alongside a 3% rise in U.S. comp sales. Analysts note that the company’s strategy involves leveraging aggregator partnerships and new product launches to drive growth. Investors are closely watching Domino’s as it adapts to market conditions and competitive pressures in the food delivery landscape.
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