By Sam Boughedda
Domino's Pizza (NYSE:DPZ) was downgraded at Baird and Citi on Friday in reaction to the company's recent earnings release.
Before the previous session opened, Domino's reported an earnings beat but a revenue miss, prompting analysts to re-rate and adjust price targets on the stock.
Citi analysts downgraded DPZ to Neutral from Buy, dropping the firm's price target on the stock to $316 from $429 in a note to clients on Friday.
"DPZ can point to success driving the carryout business (good for store profits) and share gains within the QSR pizza category; however, we believe: (1) the former also means competing with a broader swath of restaurants; and (2) the latter defines the competitive set too narrowly and glosses over the inroads 3PD has made into the category," argued the analysts.
They added that decelerating trends in both delivery/carryout and an only 2% SSS gap between essentially fully staffed stores and the bottom quintile of stores "suggest the problems run deeper than just staffing/the solutions may be a tougher fix."
"This will translate into at least another year of challenged top/bottom-line growth, and, with limited visibility into earnings growth sustainably reaccelerating to prior norms despite still-elevated valuation vs. peers/market, we are stepping aside," concluded the analysts.
Elsewhere, Baird downgraded Domino's to Neutral, with a revised price target of $320, from $400 per share. The analysts there stated that the firm came away from DPZ's Q4 report with "lower conviction in the fundamental outlook."
"When factoring in our reduced estimates, management's expectations for slower top-line growth in upcoming years, and the limited visibility to improved U.S. comps performance, we are having difficulty arguing for a significant rebound in the shares on a near-term basis," wrote the analysts.
DPZ shares closed Thursday's session down more than 11%, while they have declined a further 1.9% premarket Friday.