This Is What Makes Papa John's One The Tastiest Long-Term Opportunities In The Restaurant Space

Papa John's Int'l, Inc. PZZA seems to be serving up delectable offerings, as has been seen by sell-side views on the stock. The most recent view comes from Stephens, which hosted investor meetings with the company's chief financial officer Lance Tucker and president/chief operations officer Steve Richie.

Attractive Opportunities

Stephens said in a note on Friday it believes Papa John's has one of the most attractive multiyear opportunities in the restaurant space. Elaborating the opportunities, the firm said it has potential to double its total unit count, a 3–5 times expansion in its international opportunity and a path to accelerate its same-store sales growth and further outpace a lagging restaurant industry.

Analyst Will Slabaugh indicated that the themes discussed in the meeting included investment in digital, opportunities around CRM and 1X1 marketing, competitive landscape against the backdrop of pervasive discounting share gains, franchise mix and the company's balance sheet.

Maintaining Domestic Comp Estimate

After Papa John's reported first-quarter comps at the low-end of its fiscal year 2017 guidance range, the analyst noted that investment community have raised concerns that tougher comparisons in the back half would make it difficult for the company to hit the guidance range.

Slabaugh terms the unit growth path as attractive and feels the company has the room to close the technology gap with Domino's Pizza, Inc. DPZ.

The analyst maintains his 2017 domestic same-store sales estimate toward the low end of the guidance range of 2–4 percent, flat lining with 2016.

"We expect certain initiatives to help propel the 2-year comp throughout the year, likely helping sentiment and the share price," Slabaugh said.

Stephens also maintains his second-quarter same-store sales growth estimate of 2 percent and earnings per share estimate of $0.66. The firm's 2017 earnings per share estimate is at $2.94. The firm expects corporate cost controls and modest top line growth to help the company to hit its target.

Although the firm believes near-term pricing pressure continues to weigh on the second quarter, it said it likes the strategic moves by the company to invest further in its technology infrastructure. The firm also thinks the company will pursue same store sales growth in the back half of 2017 and 2018.

As such, Stephens maintains its Overweight rating on the shares of Papa John's, but it lowered its price target to $90 from $100. The lowered price target, according to the firm, is due to the market accepting the lower end of the company's 2017 guidance range.

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