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On Monday, Morgan Stanley (NYSE:MS) reiterated its Overweight rating on Domino’s Pizza (NYSE:DPZ) shares with a steady price target of $496, representing a potential 14% upside from current levels. According to InvestingPro data, analyst targets for the stock range from $402 to $559, with a consensus recommendation of 1.88 (Buy). The financial institution’s analyst, Brian Harbour, provided insights into the company’s strategy and performance expectations. According to Harbour, Domino’s Pizza has not revealed specific product plans, which is considered reasonable. However, the company indicated that it would likely add more aggregator platforms in the second half of the year, with an extension of its Uber (NYSE:UBER) exclusivity agreement until May 1.
Domino’s Pizza’s guidance for approximately 3% U.S. same-store sales (SSS) growth this year reflects the company’s comprehensive plans under current macroeconomic and competitive pressures. This projection is slightly above the street’s expectation of 2.9%. The company’s financial health appears solid, with InvestingPro analysis showing strong profitability metrics, including a 28.5% gross profit margin and impressive 33.7% return on assets over the last twelve months. The forecast does not necessarily account for the best-case scenario for various growth drivers but rather mirrors the previous year’s macro environment, promotional activities, product launches, and third-party delivery expansion, along with low single-digit percentage price increases and an e-commerce overhaul.
Harbour suggests that any aspect of Domino’s strategy that outperforms last year’s could lead to an increase in the anticipated 3% SSS growth. Conversely, if the company’s performance aligns with peers, the stock may not stand out in the market. International sales might exceed expectations as they did in the fourth quarter, but overall revenue growth could be hampered by challenges in unit growth.
Morgan Stanley’s forecast for Domino’s top-line figures has been modestly reduced for 2025 and 2026, considering both comps and units. The firm’s bottom-line projections were already below the street’s estimates due to factors including foreign exchange, but margin improvements have led to a slight increase in the forecast for fiscal year 2025, with a minor decrease for fiscal year 2026. Domino’s remains confident in achieving around 8% operating profit growth excluding foreign exchange impacts. The company has demonstrated strong financial discipline, maintaining dividend payments for 13 consecutive years and achieving a 24.8% dividend growth in the last twelve months. The price target of $496 and the Overweight rating remain unchanged, reflecting Morgan Stanley’s positive stance on the potential for same-store sales outcomes. For deeper insights into Domino’s Pizza’s financial health and growth prospects, including 8 additional exclusive ProTips, check out the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Domino’s Pizza reported its fourth-quarter earnings for 2024, which showed a slight miss on both earnings per share (EPS) and revenue compared to analyst expectations. The company posted an EPS of $4.89, falling short of the forecasted $4.96, and revenue of $1.44 billion, below the anticipated $1.49 billion. Despite these challenges, Domino’s achieved an 8% growth in operating income, demonstrating operational efficiencies and cost management. Additionally, Domino’s extended its exclusive partnership with Uber Eats until May 1st, which accounted for approximately 2.7% of its total revenue in the fourth quarter of 2024. Analysts at Truist Securities see a potential partnership between DoorDash (NASDAQ:DASH) and Domino’s as likely in the second half of 2025, which could significantly impact DoorDash’s business. TD Cowen analyst Andrew M. Charles maintained a Buy rating for Domino’s stock with a price target of $490, citing positive strategic focuses for 2025. Domino’s management also plans to negotiate with other third-party food aggregators, which could contribute up to $1 billion in sales. The company remains focused on product innovation and expanding its presence on delivery platforms, anticipating continued growth in the coming years.
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