Citi downgraded Domino’s Pizza ( NYSE: DPZ ) to Neutral from Buy on Friday, explaining that the latest earnings result had broken their previously bullish thesis.
The analysts noted that the bottom line boost from the carryout business is not enough to offset clearly increasing competition and slowing trends for delivery. Additionally, the focus on QSR competition in the earnings call obscures growing competition from full service operators.
“Decelerating trends in both delivery/carryout and an only 2% SSS Gap between essentially fully staffed stores and the bottom quintile of stores suggest the problems run deeper than just staffing/the solutions may be a tougher fix,” the downgrade explained. “This will translate into at least another year of challenged top/bottom-line growth, and, with limited visibility into earnings growth sustainably reaccelerating to prior-norms despite still-elevated valuation vs. peers/market, we are stepping aside.”
Shares of the Michigan-based pizza chain fell about 1.3% in premarket trading on Friday, extending a double-digit decline marked on Thursday.
Read more on the details of Thursday’s earnings results .
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Domino’s downgraded to Hold at Citi after earnings under-deliver