On Monday, UBS has increased the price target for Domino's Pizza (NYSE:DPZ) to $600 from the previous $570, while maintaining a Buy rating on the stock. The firm cited the pizza chain's ongoing sales momentum and solid traffic, which they believe positions Domino's well for sustained multi-year sales growth in the United States.
UBS highlighted several factors contributing to this outlook, including Domino's value proposition, enhancements to its digital and loyalty programs, improved service levels, menu innovation, and effective marketing strategies.
The analyst also pointed out that Domino's partnership with third-party aggregators should continue to support its performance relative to the slower trends seen in other quick-service restaurants (QSRs). The company's promotional offers and pricing strategy, which have been below industry levels in recent years, were noted as key elements of Domino's affordability and appeal to families.
The review of recent Numerator data, along with management's comments, has reinforced UBS's confidence in the strong customer demand Domino's is experiencing across all income levels, including lower-income consumers.
Despite a significant year-to-date increase in Domino's stock price, approximately 25%, UBS believes there is still room for growth. The firm anticipates Domino's to maintain its leading position in traffic and same-store sales (sss) momentum, coupled with accelerating unit growth.
The updated stock price target of $600 is based on a multiple of roughly 23 times the next twelve months' (NTM) EBITDA, up from the previous multiple of 22, reflecting increased confidence in the company's sustained growth trajectory. UBS's outlook for Domino's is rooted in the broad momentum the company is seeing across different income groups and the firm's belief in the company's potential for multi-year earnings beats.
In other recent news, analyst firms Citi, Wells Fargo (NYSE:WFC), HSBC, Baird, and Benchmark have all recently provided their perspectives on the company's prospects. Citi maintained a neutral stance on Domino's Pizza, acknowledging the company's optimistic business momentum and focus on value offerings and product innovation.
Notably, Wells Fargo revised its price target for Domino's Pizza following strong Q1 results, which included a significant increase in U.S. comparable sales and a notable improvement in EBIT margin. The firm also acknowledged the positive impact of the company's loyalty programs and other initiatives on its financial performance.
HSBC raised its price target for Domino's Pizza, citing the company's strong global brand and growth prospects. The firm also highlighted Domino's robust free cash flow growth, supported by a significant share buyback program.
Meanwhile, Baird increased its price target for Domino's Pizza, noting the company's effective customer traffic-driving strategies in the U.S. market. However, the firm tempered its optimism with the company's unchanged margin guidance for 2024.
Lastly, Benchmark also raised its price target for Domino's Pizza following strong Q1 operating results, which surpassed market expectations. These recent developments underscore the ongoing momentum for Domino's Pizza.
InvestingPro Insights
In light of UBS’s positive outlook on Domino's Pizza, real-time data from InvestingPro supports the view that DPZ has been performing well financially. With a robust market capitalization of $17.97 billion and a notable year-to-date price total return of 25%, the company's financial health appears strong. Additionally, the revenue growth in the last quarter of Q1 2023 was 5.88%, indicating continued momentum in sales.
InvestingPro Tips indicate that Domino's Pizza has a history of rewarding its shareholders, having raised its dividend for 10 consecutive years and maintained dividend payments for 13 consecutive years. Moreover, the company's liquid assets exceed short-term obligations, providing financial stability. For investors looking for further insights, there are additional tips available on InvestingPro, including analysis on Domino's trading multiples and profitability forecasts. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription for access to these valuable tips and more.
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