On Wednesday, Bernstein updated its outlook on Domino's Pizza (NYSE:DPZ), increasing the stock price target to $430 from the previous $370. The firm maintained its Market Perform rating on the stock.
The adjustment reflects a positive stance on the potential for unit growth within the United States, as franchisees are seeing rising profits due to lower commodity inflation, which could bolster the opening of new units.
The analyst from Bernstein acknowledged the company's efforts to expand, noting that the improved financial performance of franchisees should be conducive to growth. However, there is a cautious approach to the projected unit growth, as the analyst anticipates a slight shortfall compared to the company's own guidance.
This conservative estimate takes into account the possibility that some store openings planned for the end of the fiscal year might be deferred to FY25.
Domino's Pizza's international expansion was also a point of consideration in the updated price target. Challenges in international markets were recognized as a potential obstacle to growth.
Specifically, the company's strategy is seen as being weighted towards countries where consumer sentiment is currently weak, such as China. This could pose a risk to achieving the targeted number of new store openings for FY24.
The analysis by Bernstein suggests that while there are positive factors at play domestically for Domino's Pizza, international market dynamics present a level of uncertainty. The company's performance and expansion efforts are being closely watched as they navigate both domestic and international growth opportunities in the coming fiscal year.
The updated price target of $430 indicates a level of confidence in Domino's Pizza's strategy and market position, albeit tempered by a realistic view of the challenges that lie ahead, particularly in the international arena.
The Market Perform rating suggests that the stock is expected to perform in line with the overall market or sector in the near term.
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