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On Tuesday, Redburn-Atlantic began coverage on Domino’s Pizza (NASDAQ:DPZ) shares with a Sell rating, setting a price target of $340. Currently trading at $468, with a market capitalization of $16 billion and a P/E ratio of 26.7x, the stock appears overvalued according to InvestingPro analysis. The firm’s analysis points to significant challenges for the pizza chain, including the impact of GLP-1 adoption, which is said to affect Domino’s due to its focus on dinner occasions and reliance on lower-income consumers.
According to Redburn-Atlantic, Domino’s is experiencing weak organic traffic, with carryout orders surpassing delivery—a trend that could potentially support sales volumes but may also lead to reduced profit margins. This shift towards aggregator platforms is seen as a double-edged sword for the company, though the company maintains a solid 28.4% gross profit margin and has achieved 4.3% revenue growth in the last twelve months.
The firm’s report suggests that the growth of system sales for Domino’s is under threat, and with market expectations still high, there could be a downside risk for the stock. The current trading price, based on the estimated 2025 earnings, reflects a P/E multiple of 25.9 times.
Redburn-Atlantic’s coverage launch sets the price target for Domino’s stock at $340 per share, which is based on a forward P/E multiple of 19.7 times. This valuation represents the firm’s view on the potential financial performance of Domino’s in the face of the pressures and challenges identified in their analysis.
In other recent news, Domino’s Pizza reported a slight decline in its first-quarter revenue, posting $1.11 billion compared to the projected $1.13 billion. The U.S. systemwide same-store sales also saw a minor drop of 0.5%, contrary to the anticipated 0.2% increase. Despite these figures, Domino’s maintained its guidance for 2025, expecting an 8% growth in operating income and a 6% rise in global retail sales. UBS has reiterated its Buy rating with a $540 price target, highlighting potential sales momentum in the U.S. and international markets. Benchmark also raised its price target to $535, maintaining a Buy rating, citing strong supply chain margins and the potential for market share gains. Meanwhile, JPMorgan adjusted its price target to $460, noting promising same-store sales trends, although it maintained a Neutral rating. Bernstein increased its price target to $460 as well, acknowledging Domino’s effective management amid economic challenges. The company plans to enhance sales with new product launches and a partnership with DoorDash (NASDAQ:DASH), which is expected to contribute to sales growth.
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