On Tuesday, JPMorgan made an adjustment to its stance on Domino's Pizza (NYSE:DPZ), downgrading the stock from Overweight to Neutral while raising the price target to $430 from the previous $420.
The decision comes after Domino's shares have significantly outperformed the broader market, delivering a return of approximately 59% since June 1, compared to about 21% for the S&P 500 index.
The firm noted that Domino's Pizza has been a unique story of improving top-line growth within their coverage, particularly in a market environment that has mostly seen decelerating growth driven by pricing. However, with the stock now trading above the anticipated range, JPMorgan suggests that the current share price reflects all known catalysts, indicating a suitable moment for investors to take profits.
The raised price target of $430 is justified by the belief that the catalysts discussed over the past six to eight months, which include factors such as improved delivery execution, new loyalty programs, a partnership with UberEats, and increased unit development by franchisees, are now fully accounted for in the stock's price. These elements have been expected to drive an uptick in systemwide sales.
Domino's performance in the U.S. market remains a central point of focus, as it accounts for about 50% of systemwide sales and approximately 75% of segment Ebitda. The change in rating to Neutral is based on the premise that the stock's current multiple now fully incorporates these factors.
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