Analysts from Stifel are no longer ordering from Papa John's International Inc. (PZZA) after the firm dropped the stock's rating to sell from hold Tuesday due to concerns about the burgeoning pizza delivery pricing war.
Lower prices industry wide will prolong the road to Papa John's recovery, according to analyst Chris O'Cull. O'Cull's previous action on the stock was upgrading it to hold from sell six months ago.
O'Cull also lowered his price target on the stock to $35, which represents a 23% downside from the stock's Friday closing price of $45.26. Papa John's was trading down 2.76% to $44.01 on Tuesday.
"In order for Papa John's to drive transactions we believe it will need to commit to an everyday low price menu that will probably hurt franchisees' profits until consumer perception of its value changes," O'Cull wrote. "These offers are clearly designed to drive transactions, but to be successful they must increase transactions enough to offset the dollar impact of the discount, otherwise the results lower store margin percentage and dollars."
The firm also slashed its 2019 earnings per share estimate to 80 cents from $1.20, which is well below Wall Street projections of $1.19 a share.