Domino's Upgraded to Outperform at Cowen on Profit Prospects

Cowen analyst Andrew Charles upgraded Domino's stock, saying the valuation is "attractive on a total-return basis."
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Domino’s Pizza  (DPZ) - Get Report shares on Friday firmed after Cowen analyst Andrew Charles upgraded the country’s largest pizzeria chain to outperform from market perform, lifting his share-price target to $450 from $445.

The company has benefited from pizza orders by consumers stuck at home during the coronavirus pandemic.

Domino’s can exceed expectations for earnings and sales comparisons in 2020-2022, Charles wrote in a report cited by The Fly. 

That’s because of "proactive measures" to advance its already strong position while boosting market share from the current level of 51% in the quick-service restaurant/pizza category, he said.

Charles predicts 14% earnings growth for 2021-2023. And the stock’s valuation is "attractive on a total-return basis," he said.

Domino’s shares recently traded at $397.92, up 2.3%. They have jumped 32% this year.

Morningstar analyst R.J. Hottovy is bullish on Domino’s business.

“We had expected Domino's to be one of the top market-share gainers as the industry recovered from coronavirus-related disruptions, but its recent comp trends are well above industry averages and other delivery/to-go-focused concepts,” he wrote in a July commentary.

“This indicates that consumers view Domino's value, digital ordering, and safety protocols (including contactless delivery) in a more favorable light than most other restaurant operators. 

"Coupled with the potential to accelerate its fortressing strategy (increasing store density by splitting franchisee territories), a more rational delivery pricing environment due to third-party aggregator fee caps in several markets, and new-product innovations, Domino's is operating from a position of strength.”

Hottovy still sees Domino stock as overvalued, putting fair value at $370.