Pizza stocks are struggling with inflation headwinds, soft demand in the mix

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Scott Olson

Domino’s Pizza (NYSE:DPZ) fell 1.39% in Tuesday afternoon trading and Papa John’s International (PZZA) shed 3.13% as investors continue to show concerns over inflation headwinds and consumer discretionary spending.

Shares of Domino’s are down 41% on a year-to-date basis and Papa John’s (PZZA) is off 44%.

Of note, PZZA hit a new 52-week low earlier in the Tuesday session after Stifel lowered its price target to $100 from $120. “Our checks indicate the pizza category continues to struggle with transaction performance, despite the more intense promotional activity,” noted Stifel analyst Christopher O’Cull.

The analyst recently cut estimates on both PZZA and DPZ with momentum slowing down. “It’s unclear what might be driving the weaker pizza consumption; we surmise it’s a combination of consumer fatigue toward pizza, more delivery and take-out options as restaurants have pivoted toward these channels, and a lack of pizza delivery drivers limiting capacity,” warned O’Cull.

Meanwhile, Bank of America thinks it may take until 2023 for volume growth to help drive EBITDA higher.

Domino’s has a Seeking Alpha Quant Rating of Hold, while Papa John’s just dropped back down to a Sell rating.

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