2023-06-01 11:51:59 ET
Domino's Pizza ( NYSE: DPZ ) broke 1.85% higher in mid-day trading on Thursday after JPMorgan turned bullish on the pizza stock.
Analyst John Ivankoe said a fresh look at estimates on DPZ indicate the stock is too cheap for what is a structurally low cost delivery at $6.99 for a medium 2-topping and take-out provider for a $7.99 3-topping large pizza.
"Franchisees have little reason to close stores as the average US franchise had 7 units and ~$140k cash flow per unit in F22 compared to ~$143k per unit in F19. We also do not believe any of them require the company’s financial assistance as seen at other quick service chains, meaning the revenue and FCF base at DPZ remains intact."
Despite the macroeconomic climate, JPMorgan still see systemwide sales growth of ~7% for DPZ driven by 5.0% to 5.5% global development. Looking ahead, new customer-facing technology and more energy around innovation and store execution is expected to boost comparable sales growth.
JPMorgan assigned a price target of $360 to DPZ based on a 4.25% free cash flow yield.
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Domino's Pizza is called a restaurant stock standout by JPMorgan