Domino's Pizza Pullback Gives Maxim Group An Appetite

Maxim Group's Stephen Anderson upgraded Domino's Pizza, Inc. DPZ from Hold to Buy on Thursday, saying investors overreacted to a bad earnings report by rival Papa John's Int'l, Inc. PZZA.

Papa John's problems are concept-specific, while Domino's has solid fundamentals despite its recent 15-percent pullback, Anderson said. (See Anderson's track record here.)

Maxim Group raised its price target for Domino's from $220 to $230. 

Domino's Pizza will continue to use technology to gain market share, Anderson said. The Ann Arbor, Michigan-based company's $7.99 large pizza promotion and Piece of the Pie loyalty program are projected to have a positive short-term impact on sales, the analyst said. 

Domino's Pizza could gain market share from Papa John's as a result of the latter company's problems with NFL sponsorship, said Anderson.

Maxim Group is projecting growth in the international market for Domino's as the company continues to build new restaurants and take over local chains; the recent purchase of the Halo Pizza market chain doubled Domino's market share in Germany. Domino's and its master franchisees are expected to continue to be opportunistic with purchases of local pizza chains overseas.

Anderson increased his EPS estimates for the fourth quarter of 2017 from $1.97 to $1.98; from $7 to $7.05 in 2018 for 2018; rom $8.30 to $8.39 for 2019 to reflect increased comp and unit growth forecasts.

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