Domino's Pizza Analyst Appreciates Brand's Longer-Term Direction Despite Near-Term Headwinds

Stephens & Co analyst Joshua Long reiterated an Equal-Weight rating on the shares of Domino's Pizza, Inc. DPZ with a price target of $300.
The analyst's recent checks suggest Domino's sales trends in the 1Q23 period were supported by a successful Boost Week and a better-than-expected initial launch of the Loaded Tots platform.
The analyst noted that Domino's is the leader within the U.S. pizza industry and is estimated to be responsible for the delivery of approximately one-third of all pizzas in the U.S.
This leadership position is further reflected by approximately ~60% of Domino's domestic sales being generated through the delivery channel.
In FY22, Domino's delivery sales were nearly $500+ million higher than pre-pandemic levels but down (6.6%) on a comparable sales basis relative to the prior year.
The analyst specified that the negative comp reflects the mounting challenges of the broader macroeconomic environment on the company's relatively more price-conscious consumer, along with ongoing normalization of sales trends by channel.
Using the company's corporate stores as a benchmark, the analyst is encouraged to hear that staffing has improved across all positions.
The analyst noted that Domino's carryout business in the U.S. accounts for about 40% of sales and can serve as a highly incremental channel to supplement the company's core delivery business, over time.
Despite recent food and labor inflation headwinds, the analyst believes the unit-level economics of Domino's business remain compelling.
Although Equal-Weight rated on DPZ shares, the analyst maintains a favorable bias toward the long-term potential of Domino's brand given its leadership within the category, organizational size & scale, and brand loyalty among consumers.
Price Action: DPZ shares are trading lower by 0.03% at $315.32 on the last check Friday.
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