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Investing.com - Goldman Sachs downgraded Domino’s Pizza Enterprises Ltd. (ASX:DMP) from Buy to Neutral on Thursday, while significantly reducing its price target to AUD17.50 from AUD23.90.
The downgrade follows Domino’s July Investor Q&A session, where management indicated plans for cost reductions targeting IT, Head Office, and SG&A expenses. Goldman Sachs cited uncertainty about the timeline for improving franchisee and company profitability due to limited details on the pace, magnitude, and cost-sharing arrangements.
The investment bank lowered its EBIT margin forecasts by 80-110 basis points, resulting in sales and EBIT reductions of 2-5% and 11-15% respectively for fiscal years 2026-2028.
Goldman Sachs also adjusted its valuation methodology, reducing the sum-of-the-parts multiple for Australia/New Zealand operations to 12x from 13x and for Asian operations (Japan and Taiwan) to 9x from 10x, reflecting uncertainty in ANZ markets and underperformance in Asia.
Despite the downgrade, the new price target still implies a 17% upside potential from current levels, with Domino’s trading at 11.6 times its projected FY26 price-to-earnings ratio.
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