RBC Capital Adjusts Price Target#
RBC Capital has lowered its price target for Domino's Pizza (NYSE: DPZ) from $400 to $350. This adjustment comes after the company reported first-quarter results that fell short of analysts' expectations for both revenue and earnings. Currently, Domino's stock is trading at approximately $335, close to its 52-week low of $346.31, and has seen an 11% decline in value since the start of the year.
Disappointing Sales Growth#
In the first quarter, Domino's reported a same-store sales growth of just 0.9% in the U.S. For March, comparable sales were estimated to have decreased by 3.5% compared to the same month last year. The company had previously forecasted a 3% growth in same-store sales for the full year, suggesting that the first half would outperform the second half. However, international sales growth also missed expectations by a notable margin.
Challenges in the Market#
The primary driver of U.S. same-store sales, carryout sales, slowed down significantly, dropping by 410 basis points from the previous quarter. This slowdown has been accompanied by increased competition, with rival companies offering discounts that have further pressured Domino's sales growth.
Financial Health and Share Buyback#
Despite these challenges, some analysts believe that Domino's stock is undervalued at its current price. The company has a price-to-earnings (P/E) ratio of 18.99 and a market capitalization of $11.23 billion. Additionally, Domino's board has authorized a $1 billion share repurchase program, which increases its total buyback capacity to $1.29 billion, representing about 11.5% of its current market cap. The company has also consistently raised its dividend for 12 years, currently offering a yield of 2.16%.