Domino’s Stock Gets Another Downgrade. Blame Price Increases.

[ad_1]

Text size

Analyst Alton Stump said he is still positive about Domino’s long-term fundamental prospects. Dreamstime

Domino’s Pizza stock edged lower on Wednesday as yet another analyst argued that it’s time to step to the sidelines.

Loop Capital analyst Alton Stump cut his rating on Domino’s (ticker: DPZ) to Hold from Buy, reducing his target for the stock price to $413 from $535. The move comes after Domino’s said it would raise the price of its mix-and-match offering to $6.99 from $5.99 for delivery orders this month.

Most of Stump’s franchise contacts were “admittedly surprised by this decision and expect it to place incremental pressure on same-store sales at least in the near-term.” he wrote in a research note. Previously, he said, franchisees had largely expected Domino’s to hold off on price increases, given concerns that the increased revenue per order wouldn’t be enough to prevent a decline in sales.

The company didn’t immediately respond to a request for comment.

“We remain positive on Domino’s long-term fundamentals and still expect the company’s domestic unit growth profile to benefit in 2022 and beyond from an accelerated pace of independent competitor closings over the course of last year,” he wrote. “However, we recommend investors remain on the sidelines pending evidence of a rebound in Domino’s US same-store sales.”

Same-store sales are in particular focus for the company this year, given that Domino’s saw such a surge during the pandemic. While that white-hot growth may no longer be possible, investors are looking to see how well momentum holds up for the restaurant as the threat of Covid-19 fades.

Stump isn’t alone in hitting pause on Domino’s. Two other analysts moved to the sidelines last week, following the company’s fourth-quarter earnings report and news that its chief executive officer is leaving.

Domino’s was down 0.4% to $391.56 near midday in New York. The shares have fallen more than 30% since the start of the year, although they are up 9.4% over the past 12 months.

Write to Teresa Rivas at [email protected]

[ad_2]