UBS maintains Buy on Domino’s Pizza with $540 price target

On Tuesday, UBS reaffirmed its confidence in Domino’s Pizza (NASDAQ:DPZ) shares, maintaining a Buy rating and a price target of $540. Currently trading at $493.56, the stock has gained nearly 20% over the past six months. The endorsement comes despite acknowledging the impact of macroeconomic headwinds on the company’s first-quarter performance, particularly in U.S. same-store sales (sss). According to InvestingPro data, eight analysts have recently revised their earnings expectations upward for the upcoming period. Analysts at UBS noted that while these headwinds persist, Domino’s strategic initiatives are expected to drive a significant sequential improvement in sales in the second half of the year.

Domino’s international performance exceeded expectations, and the company has reiterated its guidance for 2025. With a robust market capitalization of $16.9 billion and revenue growth of 5.07%, the company continues to demonstrate strong financial health, earning a "GOOD" rating from InvestingPro. The guidance includes approximately 8% growth in operating income, fueled by a projected 6% increase in global retail sales, excluding foreign exchange impacts. The forecast also anticipates a 3% increase in U.S. sss and a 1-2% rise in international sss.

UBS analysts remain optimistic about Domino’s ability to gain traction with its strategic initiatives, which are anticipated to accelerate same-store sales throughout the year. This includes gaining market share in the U.S. market, where achieving a 3% increase in U.S. sss for 2025 is seen as feasible, barring further macroeconomic downturns.

The focus is now shifting to the expected improvement in U.S. sss in the second quarter, with an even stronger performance anticipated in the second half of the year. Domino’s is looking to boost sales with the introduction of its Parmesan Stuffed Crust pizza and a forthcoming partnership with DoorDash (NASDAQ:DASH) set to launch in May, which is projected to add a substantial layer of sales growth.

In conclusion, UBS analysts believe that Domino’s stock has upside potential, with U.S. sales likely to be bolstered by a strong lineup of catalysts and the prospect of accelerated global unit growth in the coming years. Trading at a P/E ratio of 28.06, InvestingPro analysis suggests the stock is currently trading above its Fair Value. For deeper insights into Domino’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

In other recent news, Domino’s Pizza reported first-quarter earnings for 2025 that exceeded market expectations, with an earnings per share (EPS) of $4.33 compared to the consensus estimate of $4.06. This performance was bolstered by a gain on investment and strong international comparable sales. Despite a slight decline in U.S. franchised same-store sales, international sales grew by 3.7%, surpassing forecasts. BMO Capital Markets, Loop Capital, and RBC Capital all raised their price targets for Domino’s Pizza, highlighting the company’s robust international growth and strategic initiatives. BMO set a target of $540, Loop Capital increased it to $564, and RBC Capital adjusted theirs to $550, all maintaining positive ratings.

Conversely, Barclays (LON:BARC) lowered its price target to $420, citing weaker-than-expected U.S. comparable sales. Despite this, Domino’s reiterated its full-year guidance, expecting improvements driven by new product launches and partnerships. Goldman Sachs maintained its Buy rating with a target of $530, noting the company’s potential for market share gains. Analysts from various firms have expressed confidence in Domino’s strategic growth plans, while also acknowledging challenges in the domestic market. The company’s ongoing initiatives, including the introduction of Stuffed Crust Pizza and a partnership with DoorDash, are expected to support future sales growth.

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