Shares of ASX-listed Domino’s Pizza Enterprises Limited (AU:DMP) cratered over 30% today after the pizza maker shunned its outlook for Fiscal 2024, citing challenging momentum in Japan. While Domino’s is working on improving sales and unit economics across regions, management has advised to discard any prior guidance on H1 FY24 results. Analysts from renowned research firms were quick to react and revisit their stance on Domino’s Pizza shares. DMP stock hit a new 52-week low of AU$39.10 today.
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Domino’s Pizza Enterprises (DPE) is the Australian operator of the Domino’s Pizza brand restaurants. It is the largest Domino’s Pizza franchise operator, with a presence in Australia, New Zealand, Europe, and Asia. Excluding today’s stock plunge, DMP shares have lost over 22% in the past year.
Domino’s Preliminary Results
Ahead of the release of the first-half results set for February 21, 2024, Domino’s Pizza Enterprises gave a surprising trading update about the preliminary results. The company witnessed solid sales growth in the Australia and New Zealand (ANZ) region and Germany. However, weaker same-store sales in the Asian region weighed on its H1 FY24 results.
Asia saw a massive 8.9% decline in same-store sales, mainly due to the negative network sales growth in Japan. Further, Singapore and Taiwan showed sales momentum, but Malaysia lagged far behind.
Domino’s preliminary net profit before tax (NPBT) for H1 FY24 is forecasted between AU$87 and AU$90 million. The upper end of this guidance reflects a nearly 14% decline compared to the same period last year while showing resilience compared to the H2 FY23 numbers.
Meanwhile, Domino’s ANZ region sales showed the most powerful performance in the six years. The ticket sizes and re-order frequencies from customers are steadily increasing in the ANZ region. The company exited 2023 as the fastest-growing pizza company in Australia thanks to non-conventional marketing efforts and partnership with delivery giant Uber (NYSE:UBER).
At the same time, its European operations were lifted by a stellar performance in Germany and some other parts of the nation. Domino’s will provide more clarity on the H1 FY24 results during its interim results in February.
Analysts’ Reactions
Jefferies analyst Michael Simotas downgraded DMP to Sell from Hold and maintained the price target at AU$46 (15% upside potential). Simotas is unhappy with DMP’s futile promises of future performance. The NPBT for H1 FY24 is projected below Jefferies’ expectations amid deterioration in Europe and Asia. Simotas said that the market’s “patience is running thin” and that he sees further downside to the stock.
Meanwhile, Citi analyst Sam Teeger lowered DMP stock to Hold from Buy. Teeger noted that the solid performance in ANZ will not offset the slowdown in same-store sales in Asia and Europe. The analyst also cut his earnings per share estimates for 2024 through 2026.
Finally, Morgan Stanley analyst Melinda Baxter stuck with her Buy rating on DMP and an AU$68 (70% upside) price target.
Is Domino’s Pizza a Good Stock to Buy?
Overall, DMP stock has a Hold consensus rating backed by three Buys, one Hold, and two Sell ratings. On TipRanks, the Domino’s Pizza Enterprises Ltd share price forecast of AU$55.28 implies 38.7% upside potential from current levels.
