Benzinga - by Shivani Kumaresan, Benzinga Staff Writer.
Wedbush analyst Nick Setyan reiterated an Outperform rating on the shares of Papa John's International Inc (NASDAQ: PZZA) and raised the price target from $85 to $87.
Fourth-quarter FY23 North America system wide same-store sales growth of 2% was above the consensus estimate of 1.7%, driven by transaction and ticket growth, says the analyst.
Starting in the second quarter of 2024, franchisees have agreed to increase their national marketing fund contribution from 5% to 6%, notes the analyst.
Between the raised national media spend, consistent menu innovation, and pizza category's expanding value proposition, the analyst views the current 2024 consensus N.A. SSS growth estimate of 2.4% as realistic. The analyst expects 2024 SSS growth to be largely driven by transaction growth.
If incentives like waiving marketing fund contributions for 5 years for new stores built in FY24 should yield a meaningful acceleration in franchised unit growth pipeline, the analyst thinks similar incentives will be offered in FY25 and beyond.
International margin is poised to increase with the closure of unprofitable U.K. units even as the Middle East conflict limits NT international SSS growth visibility, says the analyst.
Despite widespread skepticism, operating margins are slated to expand at least in line with current consensus expectations.
The analyst increases FY24 operating margin estimate to 7.5% from 7.1% and EPS estimate to $2.85 from $2.74.
The new price target of $87 represents a 15.4x EV/EBITDA multiple on the analyst's FY24 EBITDA estimate.
Price Action: PZZA shares are trading higher by 0.08% at $71.82 on the last check Thursday.
Photo by Don Sniegowski via Flickr
Latest Ratings for PZZA
| Feb 2022 | Deutsche Bank | Maintains | Hold | |
| Feb 2022 | Stephens & Co. | Maintains | Overweight | |
| Feb 2022 | Keybanc | Maintains | Overweight |
View the Latest Analyst Ratings
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