Friday, BTIG maintained its Neutral rating on Papa John's shares, which currently trade at $50.13, down nearly 32% year-to-date. According to InvestingPro data, 12 analysts have recently revised their earnings downward for the upcoming period.
The firm anticipates that the upcoming investor day in Atlanta, led by the new CEO Todd Penegor, will present Papa John's strategies for reducing development costs in the U.S., optimizing development incentives, revising international strategies, and decreasing closures to enhance system unit growth.
The company is also expected to outline its advertising tactics, suggesting a potential shift towards localized advertising in the coming year, as well as its latest digital and rewards initiatives. While InvestingPro's Fair Value analysis suggests the stock is currently undervalued, BTIG acknowledges that Papa John's management has addressed many immediate business needs but expresses ongoing concern regarding long-standing structural challenges.
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These challenges, as outlined by the firm, include high rates of management turnover, a high number of store closures, the poor health of franchisees, a dependency on single-unit franchisees, and a constantly changing international strategy. BTIG believes these issues will require multi-year efforts to resolve, which historically, have not been undertaken with sufficient determination or duration.
The firm's stance remains neutral due to these enduring structural issues, pressures on transaction volumes, and an overall lack of momentum for Papa John's. Despite the company's efforts to address various operational aspects, BTIG suggests that the structural problems have plagued Papa John's throughout its history as a public company and continue to pose significant challenges.
In other recent news, Papa John's International (NASDAQ:PZZA) Inc. faced a downgrade from KeyBanc due to concerns about the pizza chain's path to recovery. The downgrade, from Overweight to Sector Weight, comes after KeyBanc engaged with stakeholders, revealing potential challenges for Papa John's domestic sales and profit recovery.
Despite a slight uptick in same-store sales trends, KeyBanc anticipates another tough quarter for the brand. Papa John's reported Q3 results showed a 3% decrease in global system-wide sales at $1.2 billion, with North American comparable sales declining by 6%. Total (EPA:TTEF) revenues were reported at $507 million, a 3% decrease from the previous year, and adjusted operating income for Q3 stood at $29 million, down $4 million year-over-year.
The company also announced plans to open over 100 new restaurants in North America and expects international openings to exceed 170. These recent developments highlight Papa John's commitment to improving its loyalty program, driving transactions, and balancing premium and value offerings. The company plans to host an analyst and investor meeting on December 12, 2024, to discuss future strategies. Adjusted operating income for the full year is anticipated to be between $135 million to $150 million.
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