Domino's Pizza Is An Under Appreciated Revival Story - Oppenheimer Selects As Top Pick

Oppenheimer analyst Brian Bittner reiterated the Outperform rating on Domino's Pizza Inc DPZ, raising the price target to $450 from $427.

The analyst views DPZ as an under-appreciated revival story into '24 and elevates the idea into the "top picks."

Over the past 18 months, the analyst's stance toward DPZ has been less bullish, which now has bottomed out.

On an upbeat note, Bittner expects the company to drive positive earnings revisions, validate unit growth restoration, and repair investor sentiment.

The analyst anticipates a positive revision cycle to begin in 4Q23 as DPZ enters one of the most promising self-help cycles we've identified in years.

At the beginning of FY23, DPZ lowered its 2–3 year outlook for annual system sales to 4%–8% (from 6%–10%) and guided FY23 to lower-end. 

Bittner anticipates a healthier algorithm in '24E/25E, as unit growth accelerates to 6%+ (driven by Int'l/US) and SSS improves vs. the +0.1% average over the past six quarters.

The analyst is attracted to optionality to Street's financial forecasts in '24 and beyond, particularly given the scenario analysis regarding the new SSS driver.

Bittner also anticipates unit growth to regain health and accelerate to 6%+ starting in '24, which, along with positive earnings revisions could boost investor sentiment.

For 3Q23, buy-side expectations rightfully anticipate in-line (ish) results as 3Q23 is anticipated to have similar drivers (and trends) as 2Q23, notes the analyst. Q3 EPS is expected to be $3.31.

For FY23, the analyst raised estimates to $13.76 from $13.62. For FY24, Bittner increased estimates to $16.02 from $15.53.

Price Action: DPZ shares are trading lower by 0.97% to $379.38 on the last check Tuesday.