Stifel sees Domino’s Pizza business stabilizing, upgrades to buy

Domino’s Pizza (NYSE:) was lifted to Buy from Hold, with a new price target of $350, up from $320, at Stifel on Thursday.

The analysts explained that the upgrade is based on their view that the company will begin to stabilize.

“The stock has performed poorly since 2021 as delivery sales have declined, franchisee profitability has fallen, and unit growth has slowed, causing management to reset its long-term top-line guidance,” they explained. “In light of the stock’s current (and historically low) valuation, we took a closer look at the company’s plans and spent some time with management.”

“Our upgrade reflects our belief that over the next 12 months, the company will stabilize delivery sales and continue growing carryout sales to new record levels.”

Stifel believes better sales performance, lower commodity costs, and higher labor productivity should boost franchisee profitability, sparking greater unit growth. However, they do not expect DPZ’s second-quarter to provide evidence that delivery sales are stabilizing, although they see lower costs will give some near-term earnings support.