Domino’s Pizza (NYSE: DPZ) got a major boost Wednesday after Morgan Stanley came out with bullish views on the fast food chain. The stock gained about 4% after the research firm upgraded its rating to overweight from equal weight.
Raising the target price to $283 from $268, the analysts said Domino’s holds a better valuation compared to its “slower-growing” competitors.
According to the analyst, the current market estimate of slower same-store sales growth, over the next two years, is too bearish for a market-leader like Domino’s. The estimate represents a marked slowdown from the sales performance over the last two years.
Raising the target price, the analysts said Domino’s holds a better valuation compared to its “slower-growing” competitors
Investor sentiment had turned negative after the company reported lower than expected earnings for the fourth quarter, mainly due to a drop in comparable store sales in the US amid intense competition.
The latest upgrade could allay the concerns of the stakeholders, over the challenges facing the food industry. Also, the transformation strategy adopted by the management in recent years, with a focus on revamping the menu, streamlining franchises and integrating technology, will help the company overcome the market headwinds.
The current trend indicates that the recovery that started this week will gather strength ahead of the earnings report, which is expected to be announced on April 24. It makes Domino’s stock an investment option worth considering prior to the quarterly report.
For the stock, 2018 was a year of turbulence as its experienced significant volatility, despite reaching a peak. Though they entered 2019 on a positive note, Domino’s shares retreated in recent weeks. The stock traded approximately 4% higher Wednesday afternoon. Among others, Papa John’s (PZZA) closed the day’s trading down 1.5%, while Yum! Brands (YUM) ended the session slightly lower.
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