Stifel cuts Papa John’s stock price target to $40

On Wednesday, Stifel analysts revised their financial outlook for Papa John’s International Inc. (NASDAQ:PZZA), lowering the stock’s price target from $45.00 to $40.00. Despite the adjustment, they maintained a Hold rating on the shares. The revision comes amid challenging market conditions, with the stock dropping over 11% in the past week. According to InvestingPro data, 10 analysts have recently revised their earnings expectations downward for the upcoming period.

The revision comes as Stifel updated its financial model to account for new segment reporting and a reassessment of the company’s first-quarter comparable sales projections. Recent checks indicated that same-store sales (SRS) trends for Papa John’s domestic system have remained soft. The analysts noted that while transactions may have improved, this seems to have resulted in significant check compression—where the average amount customers spend per transaction has decreased. This trend is particularly concerning given the company’s current financial position, with InvestingPro data showing short-term obligations exceeding liquid assets and a current ratio of 0.83.

Stifel’s analysts expressed caution, pointing out the difficulty in predicting an improvement in SRS without clear evidence that Papa John’s can maintain transaction gains without further investments that might reduce the average check value. They also highlighted the intense value competition within the pizza category, which could further challenge the company’s performance throughout the year.

The report also raised concerns about the impact of commissary inefficiencies and price increases, aimed at improving margins for franchisors, on the profitability of franchisees. The analysts suggested that if these factors lead to reduced profitability and an increase in store closures, it could worsen the company’s challenges.

In their commentary, Stifel’s analysts concluded that they would continue to monitor Papa John’s ability to sustain transaction improvements without compromising the check value, as well as the potential effects of competitive pressures and franchisee profitability on the company’s overall performance. For deeper insights into Papa John’s financial health and future prospects, investors can access comprehensive analysis and additional ProTips through InvestingPro, which offers exclusive access to detailed financial metrics, valuation models, and expert research reports covering over 1,400 US stocks.

In other recent news, Papa John’s International Inc. reported a strong fourth-quarter performance for 2024, significantly surpassing analyst expectations. The company achieved an earnings per share (EPS) of $0.63, exceeding the forecast of $0.51, and reported revenue of $530.77 million, which was higher than the anticipated $516.29 million. Despite these positive results, Papa John’s fiscal year 2025 guidance suggests a slight shortfall in projected adjusted EBITDA compared to consensus estimates. Analysts from Stephens, UBS, and BMO Capital Markets have recently weighed in on the company’s performance and outlook. Stephens maintained an Overweight rating on the stock, though it slightly lowered the price target to $58, citing confidence in the brand’s strategic initiatives. UBS retained a Neutral rating with a $45 price target, noting management’s strategic plans aimed at traffic recovery. Meanwhile, BMO Capital Markets adjusted its price target to $60 while keeping an Outperform rating, expressing long-term confidence in the brand despite some near-term challenges. These developments reflect ongoing efforts by Papa John’s to enhance brand strategy, improve sales trends, and expand its international market presence.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.