Pizza is no longer relevant, Domino’s Pizza profits are at the bottom
2022.12.05 13:27
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Pizza is no longer relevant, Domino’s Pizza profits are at the bottom
Budrigannews.com – Pizza Domino’s (NYSE:) was raised from Neutral to Buy by BTIG on Monday, and the company set a $460 price target for the stock.
In a note to investors, analysts stated that higher menu prices and organic improvements in driver availability would lead to a rebound in margins in 2023.
The analysts wrote, “In 2023, we expect Domino’s to benefit from easier same-store sales comparisons (especially in the first half of the year), at least three-quarters of higher menu pricing on the Mix and Match, and organic improvement in sales performance between top and bottom quartile restaurants driven in part by increase in driver supply.”
We anticipate that Domino’s will enter 2023 with menu pricing that is higher than it has been in more than a decade – more than 7% – while also facing easing comparisons due to delivery’s five consecutive quarters of negative same – store sales. In addition, we anticipate that Domino’s will likely raise the cost of its $7.99 carryout option in 2023 in order to close the gap of $2.00 between it and the Mix and Match and help franchisee margins.
In addition, BTIG anticipates that its fundamentals will improve in 2023, which will result in an uptick in development in 2024 and, consequently, a rise in the share price “as the narrative shifts to bearish from bullish.”
The analysts elaborated:We believe that Domino’s commodity basket inflation reached its highest point in the second quarter of 22 and has since slowed.We anticipate that Dominico’s commodity basket will rise by at least 13% for the entire year 2022, rising by low double digits in the first quarter, 15.2% in the second quarter (peak), and around 13% for the remainder of the year.
We anticipate that Domino’s could experience commodity inflation in the low single digits in 2023. However, the company’s existing pricing in the mid to high single digits should more than make up for this, allowing for an expansion in margins.”
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