YUM - Domino's Pizza stock sending 'bullish signals' - UBS

2023-04-04 08:33:56 ET

In a research note outlining investor sentiment in the restaurant space, UBS advised Dominos Pizza ( NYSE: DPZ ) is a top pick.

According to the Swiss bank’s analysts, Starbucks Corporation ( SBUX ), McDonald’s Corporation ( MCD ), and Yum! Brands ( YUM ) are the “most crowded longs” in the restaurants space, while Wendy’s Corporation ( WEN ) and The Cheesecake Factory ( CAKE ) are the most popular shorts. However, the bank’s quant team advised that a better predictor of future performance is whether or not an already crowded stock has become more crowded in the past three months, making for a two-factor crowding momentum score.

According to the team, Domino’s ( DPZ ), Jack in the Box ( JACK ), Portillo’s ( PTLO ), Papa John’s ( PZZA ), and Wingstop ( WING ) were top scorers in this analysis. Wendy’s ( WEN ) and Cracker Barrel ( CBRL ) scored the worst under the two-factor method.

“Conversations suggest DPZ sentiment has improved over the past month, consistent w/ crowding scores, likely given some anticipated improvement in recent sales checks / trends, potential for an eventual 3P delivery partnership announcement, lowered expectations, and an investor event later in the year,” the team wrote. “But we're surprised by the magnitude of positive DPZ crowding relative to select peers. We like DPZ, which maintains bullish signals in analysis…DPZ is the only stock we rate Buy where crowding data offers a bullish signal.”

Elsewhere, Potbelly ( PBPB ) and Dine Brands ( DIN ) were said to be showing strong momentum. Meanwhile, Dutch Bros ( BROS ), Krispy Kreme ( DNUT ), Kira Sushi ( KRUS ), and Sweetgreen ( SG ) received a negative momentum rating with low crowding scores, as the quant team warned of negative momentum in recent months.

Dig into more recent restaurant industry surveys from Piper Sandler and Citi .

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