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Domino’s Pizza: weak demand fears ‘exaggerated’, UBS upgrade to buy

Domino’s Pizza: weak demand fears ‘exaggerated’, UBS upgrade to buy

Written by Sinad Karahimetovic

UBS of Domino’s Pizza (DPZ) to buy from neutral because they see the risk/reward attractive.

UBS argues in the upgrade memo that concerns about weak demand are “exaggerated.” The bank sees catalysts that could accelerate US sales trends while also citing a compelling long-term growth profile as factors that drove it to upgrade DPZ shares to a buy. Furthermore, the results of the UBS survey showed a strong demand for pizza and Domino’s.

“We see near-term catalysts for accelerating the sales of the Dubai Agriculture Zone from: the anticipated anticipated price increases on select promotions, efforts to improve the shortage of driver staff, and potential delivery partnerships between third parties. In addition, we believe that the Dubai Development Zone should To demonstrate above-average resilience in a stressful spending environment given its leading value position and a very affordable dinner option for families.

Aside from the US market, UBS applauds “best in class” global unit growth.

“We believe that strong cash returns, achieved success, and store footprint with manageable competition and relatively low cannibalism (only 70 basis points impact and lower trend) remain supportive of accelerated US unit growth to ~3-4%. International whitespace and franchisee strength Brand positioning is driving our projected growth of around 7-8% outside of the US, with approximately 6% for global development.”

The bank also lowered its target price to $385 from $430 per share to reflect the reduced 2022/2023 estimates that reflect the overall challenges and headwinds in the FX market. However, the new target price indicates the potential for a rise of more than 20% in the shares of the Industrial Development Zone.

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DPZ shares are up more than 3% in the pre-opening period on Tuesday.

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