Domino’s Pizza (DPZ) is a leading restaurant brand with over 20,500 locations globally. It has a growing presence in over 90 markets, a trend that will likely continue in the coming years.
DPZ’s growth is mostly because of its franchise model, which enables local entrepreneurs to start their chains. This model, which is also used by popular chains like McDonald’s, KFC, and Taco Bell, is seen as a better asset-light approach for running businesses.
It is also an ideal approach because the company receives regular payments from its franchise holders. Most importantly, it also makes money from supply chain revenues.
Domino’s Pizza business has a large total addressable market that is growing. For example, data shows that the pizza category grew from $37.5 billion in 2018 to over $41.3 billion in 2023, a trend that will continue.
DPZ’s business has been relatively stable in the past few years as competition in the sector has grown. Some of the most notable competitors are companies like Pizza Hut, Papa Johns, and Little Caesars.
As a result, its annual revenue has remained around the $4.4 billion range in the past few years. Its annual profit has also jumped to $519 million.
Domino’s Pizza stock was trading at $430, while its HypeIndex metric rose to 173%, signaling a potential comeback.
Positive hype
Domino’s Pizza’s positive hype grew after Warren Buffett’s Berkshire Hathaway bought a large stake in it, becoming one of its biggest investors. Buffett is often seen as the best investor in our generation.
His investment is notable because he has been actively selling shares in companies like Apple and Bank of America. He now owns 1.2 million shares in the company valued at about $550 million.
The other top holders of Domino’s Pizza are Vanguard, Blackrock, T.Rowe Price, and Principal Financial Group. Norges Bank, the Norwegian Central Bank is also a large holder of its shares.
Domino’s Pizza also reported strong financial results as its sales rose to over $4.39 billion in the last quarter. Its US sales were $2.1 billion, while its international ones rose to $2.2 billion. The two divisions had an equal 5.1% growth rate. Their same store sales were also equal.
Domino’s Pizza is also growing its margins, with the gross margin rising by 0.6% during the quarter, helped by procurement productivity.
The company is also returning substantial funds to investors. It repurchased stocks worth $190 million and has $926.3 million more to purchase. These repurchases have reduced its outstanding shares from 38.8 million in 2020 to 34.52 million today. As a result, its earnings per share has risen from $9.8 in 2020 to $14.8.
Domino’s Pizza has a strong dividend track record, having boosted its payouts for ten consecutive years. It has a forward dividend yield of 1.40%.
Analysts expect that its stock will rise to $480, up from the current $430.
Negative hype
Domino’s Pizza’s revenue growth has not been strong over the years. Analysts expect that its revenue growth will be 6% this year and a similar amount in 2025.
The company is facing substantial competition from the likes of Pizza Hut and Papa Johns.
Domino’s Pizza’s store count growth has started to slow down in the past few months.
Its stock has also not done well, falling by over 20% from its highest level in 2023.
Domino’s Pizza stock analysis
The daily chart shows that the DPZ share price has pulled back in the past few months. It has been stuck at the 50-day and 100-day Exponential Moving Averages (EMA). Also, it has formed a bearish flag pattern, which is a popular bearish sign.
Therefore, the stock will likely remain under pressure even after Warren Buffett’s investment. If this happens, it may drop and retest the support at $410. A move above $460 will point to more gains.
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