On Monday, Evercore ISI adjusted its financial outlook for Domino's Pizza (NYSE:DPZ), reducing the price target to $480 from the previous $500, while still maintaining an Outperform rating for the company's shares. The revision comes as the firm anticipates the release of third-quarter earnings later this week.
The adjusted price target reflects a decrease in the U.S. same-store sales (SSS) growth estimates ahead of the company's third-quarter earnings report. Evercore ISI's revised forecast is set at a 2% increase in U.S. SSS, a drop from their prior estimate of 4% and below the consensus expectation of 3.8%.
For the fourth quarter, the firm believes that a 2% growth in U.S. SSS is achievable, suggesting stability in the five-year SSS compared to the third quarter. This expectation is in contrast to the consensus prediction of a 3.5% increase. The firm notes that achieving this growth may depend on the effectiveness of promotional activities.
The new price target of $480 is based on a multiple of 24 times Evercore ISI's projected earnings per share (EPS) for the year 2026. This valuation places Domino's towards the lower end of its historical ten-year range, which typically fluctuates between 22 and 35 times EPS.
Evercore ISI's valuation of Domino's is supported by several growth initiatives, including a partnership with DoorDash (NASDAQ:DASH) expected in 2025 and a digital app relaunch. The firm also expresses confidence in the company's ability to achieve an 8% growth in operating income and a long-term double-digit EPS growth rate.
In other recent news, Domino's Pizza has seen a series of analyst adjustments, primarily driven by revised earnings and revenue estimates. Loop Capital maintained its Hold rating for Domino's Pizza based on steady sales growth, despite a slight decrease in same-store sales growth towards the end of the third quarter of 2024. Stifel reaffirmed a Buy rating, setting a stock price target at $480 and adjusting the full-year earnings per share (EPS) estimate to $16.13, slightly below the consensus of $16.17.
TD Cowen, while maintaining a Buy rating, has lowered its price target for Domino's to $475 due to an anticipated slowdown in U.S. same-store sales. The firm remains optimistic about the company's performance in 2025, expecting benefits from a potential partnership with DoorDash. Baird reduced its price target for Domino's to $535 but maintained an Outperform rating. Despite cautious remarks regarding the macroeconomic environment, Baird expressed confidence in Domino's ability to meet its 2024 EBIT growth target of over 8%.
BMO Capital, despite acknowledging increased consumer pressures, reduced the stock's price target to $510 but remained optimistic about the company's multi-year growth prospects. Lastly, Oppenheimer reduced its price target to $490 but maintained an Outperform rating, highlighting Domino's competitive advantages and potential for above-peer unit growth.
InvestingPro Insights
To complement Evercore ISI's analysis, InvestingPro data offers additional insights into Domino's Pizza's financial health. The company has demonstrated a strong commitment to shareholder returns, having raised its dividend for 10 consecutive years and maintained dividend payments for 13 years straight. This consistent dividend policy aligns with the firm's positive long-term outlook on Domino's.
InvestingPro Tips highlight that Domino's is trading at high P/E, EBITDA, and revenue valuation multiples. This premium valuation corroborates Evercore ISI's positioning of Domino's towards the lower end of its historical valuation range, suggesting that the market is pricing in future growth potential.
Despite the reduced price target, InvestingPro data shows that Domino's has been profitable over the last twelve months and analysts predict continued profitability this year. This supports Evercore ISI's confidence in the company's growth initiatives and long-term earnings potential.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for Domino's Pizza, providing a deeper understanding of the company's financial position and market performance.
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