Cowen Upgrades Domino’s Pizza (DPZ) to Outperform as Digital Investments Pay Off
Despite the hit that many dining companies have taken during the coronavirus pandemic, Domino’s Pizza has made all the right moves. As a result, on Friday, analysts at Cowen upgraded the name to Outperform (from Market perform), raising their price target to $450 (from $445).
In a time where dine-in restaurants seem almost taboo, Domino’s has taken full advantage and upped the usage of their mobile app and online website to sell pizzas digitally. In fact, they’ve done so well in this arena that digital sales accounted for 75% of 2Q20 sales, according to Cowen. A big part as to why these big chains are performing so well is the downturn that small pizza stores have experienced. The dollar slice from a family-owned pizza restaurant is the quintessential standard of a successful small business and Covid-19 has made it almost impossible for them to compete against big chains such as Domino’s and Pizza Hut.
Looking to 2021, the equity research team at Cowen believes Domino’s Pizza’s recent success will still hold weight. As we accept a new normal, delivery and carryout options remain essential to any consumer or restaurant business. The Michigan-based company will likely continue to take advantage of this new trend, as their already-developed digital services will grow to accept more and more loyal customers. The analysts expect that their “playbook” will include “menu and technological innovation, expanded value offerings and an ad fund surplus to help gain share in the $41 billion QSR pizza category.”
It’s hard to say that the largest pizza restaurant in the world will see a downturn in the upcoming year, especially given its success in the past year and talented management team. We’ll have to see how their new playbook performs, but we have little doubt that the pizza powerhouse will realize even more success in 2021, in our opinion.
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