On Thursday, Goldman Sachs (NYSE:GS) initiated coverage on Domino's Pizza (NYSE:DPZ) shares, assigning a Buy rating to the stock with a price target of $612.00. The firm sees a 16% upside potential to the stock based on the target price over the next 12 months. The optimism from Goldman Sachs stems from the company's robust performance and strategic initiatives.
Domino's Pizza has been implementing its "Hungry for More" strategy since the fourth quarter of 2023, which has been pivotal in driving the company's growth. Innovative marketing efforts, such as the updated rewards program and the emergency pizza campaign, have contributed to the company's leading transaction growth. Domino's also continues to demonstrate some of the most impressive franchise unit level economics within the restaurant sector.
Goldman Sachs believes that Domino's Pizza has several growth drivers that will sustain its momentum. These include the benefits from the revamped rewards program, gains in the carryout market share, and the expansion of its partnership with UberEats. The firm forecasts a compound annual growth rate (CAGR) of 5% in unit growth and a 3-4% increase in same-store sales growth (SSSG) from 2024 through 2026.
Additionally, the firm projects modest general and administrative (G&A) leverage, leading to earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates that are 2% above the consensus. This translates to an anticipated EBITDA growth of approximately 10% over the next three years.
The positive outlook from Goldman Sachs reflects confidence in Domino's Pizza's ability to maintain its growth trajectory and capitalize on its strategic initiatives. The company's focus on execution and market share gains positions it favorably within the competitive restaurant industry. The $612 price target from Goldman Sachs offers investors a view of the potential value that may be realized if Domino's Pizza continues on its current path.
In other recent news, Domino's Pizza has been the subject of several analyst reports, all highlighting the company's recent developments. Citi maintained a neutral stance on Domino's shares, noting the company's focus on everyday value, product innovation, and growth channels like third-party delivery.
Wells Fargo (NYSE:WFC), on the other hand, increased Domino's price target following a strong first-quarter performance, marked by a 5.6% U.S. comparable sales increase and a notable improvement in EBIT margin.
Baird also increased Domino's price target, acknowledging the company's effective customer traffic-driving strategies in the U.S. market. However, Baird tempered expectations for near-term earnings growth due to the company's unchanged margin guidance for 2024. HSBC raised Domino's price target, emphasizing the company's strong global brand, value proposition, and robust free cash flow growth.
Lastly, Benchmark raised Domino's price target, citing strong first-quarter operating results that surpassed market expectations. The company's revenues reached $1.085 billion, and earnings per share stood at $3.58, growing 22% year-over-year. These recent developments reflect the positive financial results and outlook for Domino's Pizza.
InvestingPro Insights
In light of the recent coverage by Goldman Sachs, current metrics from InvestingPro shed additional light on Domino's Pizza's (NYSE:DPZ) financial health and market performance. With a market capitalization of $18.51 billion and a robust P/E ratio of 34.56, the company's valuation reflects its strong market position. This is further affirmed by a solid revenue growth of 5.88% in Q1 2023, indicating a healthy expansion trend.
InvestingPro Tips suggest that Domino's Pizza has a history of rewarding investors, having raised its dividend for 10 consecutive years and maintaining dividend payments for 13 consecutive years. Additionally, the company's liquid assets exceed short-term obligations, providing financial stability. These factors, along with a high return over the last year and a price that is currently near its 52-week high, paint a picture of a company that is not only growing but also managing its finances prudently.
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