On Thursday, Stifel, a financial services firm, adjusted its price target for Domino's Pizza (NYSE:DPZ) shares, reducing it to $470 from the previous target of $480. Despite this change, the firm has maintained its Buy rating on the stock.
Domino's Pizza's third-quarter domestic performance met analyst projections, showing steady but slower comparable growth due to tougher industry challenges. However, the company's strategic value promotions have been successful in gaining market share. Internationally, Domino's experienced weaker results than anticipated, particularly in Western Europe and Asia, where consumer spending has softened.
For the years 2024 and 2025, Domino's anticipates global retail sales growth to be slightly below their long-term target, forecasting a 6% increase compared to the expected 7% or higher. This projection takes into account the anticipated continued softness in consumer spending across various markets.
Stifel's ongoing Buy rating is supported by the belief that Domino's has multiple potential sales growth opportunities lined up for 2025. These include possible expansion of partnerships with third-party marketplaces like DoorDash (NASDAQ:DASH), the introduction of new pizza products such as stuffed crust cheese, and leveraging an increasingly robust loyalty program that could drive comparable sales through its expanding member base.
The firm also notes that Domino's U.S. operations are well-positioned to capture more market share, given the lower profitability of franchisees within the competitive landscape. This advantage could enable Domino's to outperform its competitors in the domestic market.
In other recent news, Domino's Pizza experienced a series of significant developments. The company's third-quarter earnings per share reached $4.19, surpassing the estimated $3.65, despite weaker-than-expected comparable store sales growth.
This came after Barclays (LON:BARC) reduced its price target for Domino's shares to $370, maintaining an Underweight rating. Stephens also maintained an Equal Weight rating, while RBC Capital initiated coverage with an Outperform rating, citing potential for improvement in profitability despite challenges.
Domino's reported a 3% rise in U.S. same-store sales for the third quarter, falling short of the projected 3.6% increase. Additionally, international same-store sales growth stood at 0.8%, not meeting the anticipated 2.9% growth. As a result, Domino's revised its annual global retail sales growth forecast down to 6% from the previously expected 7%.
The company is banking on two major U.S. comp drivers: the partnership with Uber (NYSE:UBER) initiated in the first quarter and the revamped loyalty program introduced in the fourth quarter of 2023. Looking ahead to 2025, the addition of DoorDash as a delivery partner is expected to further expand Domino's growth avenues. Various analyst firms, including Piper Sandler and Evercore ISI, adjusted their financial outlook for Domino's, reflecting changing expectations for the company's performance based on revised earnings and revenue estimates.
InvestingPro Insights
To complement Stifel's analysis, InvestingPro data offers additional insights into Domino's Pizza's financial health and market position. The company's market capitalization stands at $14.29 billion, reflecting its significant presence in the fast-food industry. Domino's has demonstrated strong profitability, with a return on assets of 33.18% for the last twelve months as of Q2 2024, indicating efficient use of its assets to generate profits.
InvestingPro Tips highlight Domino's commitment to shareholder returns, noting that the company has raised its dividend for 10 consecutive years and maintained dividend payments for 13 years. This aligns with the company's strong market position and cash flow generation capabilities mentioned in the article. The current dividend yield is 1.46%, with a impressive dividend growth of 24.79% over the last twelve months.
While Stifel has adjusted its price target, it's worth noting that the InvestingPro Fair Value for Domino's stands at $403.29, suggesting potential for price appreciation from the previous close of $413.20. This valuation, combined with the company's robust dividend history and market share gains through strategic promotions, supports Stifel's maintained Buy rating.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Domino's Pizza, providing a deeper understanding of the company's financial position and market outlook.
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