Domino’s Pizza (DPZ) shares are trading sharply higher after Citigroup analyst Gregory Badishkanian upped his rating on the stock to Buy from Hold, lifting his price target to $14, from $11.
The Citi analyst writes in a research note that he believes DPZ has seen a solid acceleration in sales in January, in contrast to softening business at other fast-food restaurants. (The industry term of art is “QSR,” or “quick service restaurant,” by the way.) He contends that the company is seeing sales up by a high single digit percentage sequentially, “owing largely to the company’s promo of its recently revamped pizza.”
He also notes that the stock is trading at only 10x forward EPS, versus an average 13x for the QSR – see, there it is again – group. If those revamped pizzas keep selling, he says, the company could see same-store sales this year on the plus side by a few percentage points, versus the low single digits slide he sees for the rest of the group.
As for those “revamped pizzas,” which were announced in December, the company said they contain a – hell, let’s go with “revamped” – crust with garlic and parsley baked in; a new “sweeter, bolder” tomato sauce, and shredded cheese “made with 100% real mozzarella and flavored with just a hint of provolone.”
DPZ today is up 75 cents, or 7.9%, to $10.19.
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